BJ’s Wholesale Club Holdings, Inc Q4 2025 Earnings Call Transcript

BJ’s Wholesale Club Holdings, Inc (NYSE: BJ) Q4 2025 Earnings Call dated Mar. 05, 2026

Presentation

Operator

Hello, everyone, and welcome to the BJ’s Fourth Quarter Fiscal 2025 Earnings Call. My name is James, and I’ll be your operator for today. [Operator Instructions]

The conference call will now start, and I’ll hand it over to Diana Rashkow. Please go ahead.

Diana Rashkow — Vice President, Investor Relations

Good morning, and welcome to BJ’s Fourth Quarter Fiscal 2025 Earnings Call. Joining me today are Bob Eddy, Chairman and Chief Executive Officer; Laura Felice, Chief Financial Officer; and Bill Werner, Executive Vice President, Strategy and Development.

Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the Risk Factors section of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today’s press release and latest investor presentation posted on our investor website for our cautionary statement regarding forward-looking statements and non-GAAP reconciliations.

And now, I’ll turn the call over to Bob.

Bob Eddy — Chairman and Chief Executive Officer

Good morning, and thank you all for joining us. We’re pleased to share that we closed out fiscal 2025 with strong momentum, delivering solid comparable club sales growth and strong profitability. Throughout the year, we navigated a dynamic environment marked by a more cautious value-seeking consumer, tariff-related and geopolitical uncertainties, and broader macroeconomic volatility. Even with these challenges, our team remained focused and resilient, consistently delivering value, convenience, and quality for our members.

We also achieved several meaningful milestones in 2025 that strengthened our business and reinforced the momentum we are carrying into the year ahead. We grew our membership base by more than 500,000 members, the largest annual increase in recent years, underscoring the relevance of our value proposition and the loyalty of the families who rely on us. We successfully opened 14 new clubs, the most we’ve ever opened in a single year, expanding our reach into new markets with sales, membership, and profit performance all well above expectations.

We also advanced our digital capabilities, with digitally-enabled sales penetration reaching 16% as more members embraced the convenience of omnichannel services. All of these are material accomplishments that create a structurally higher lifetime value for both members and shareholders. And ultimately, these achievements helped drive record full-year earnings per share, reflecting the strength of our model and disciplined execution across the business.

As always, our team demonstrated an incredible commitment to our purpose to take care of the families that depend on us. This purpose guided our decision-making and enabled us to deliver the dependable experience our members count on, no matter the conditions. That was especially evident late in the quarter when Winter Storm Fern, one of the largest storms in recent years, brought significant snow and ice across much of the US, impacting nearly our entire club footprint. We pride ourselves on being open and in stock for our members when they need us most. In the days leading up to the storm, we set a daily record for gas volume that was 20% higher than our previous daily record, reinforcing that we are a destination in times like these.

Our team worked tirelessly to keep our clubs open and ensure that our members had access to the essential supplies they needed, from groceries and household goods to ice melt and emergency items. Their remarkable efforts really showed our purpose of taking care of the families that depend on us, and I’m incredibly proud of the way that they showed up for our members and communities.

Turning to our fourth quarter sales performance. We delivered merchandise comparable club sales growth of 2.6%, reflecting our 13th consecutive quarter of market share gains and 16th consecutive quarter of traffic growth. Our perishables, grocery and sundries division grew comps by 2.3%, driven by solid unit growth, supported by improvements in assortment and merchandising. Even after lapping the chain-wide rollout of Fresh 2.0, we’re still seeing strong, steady comp performance in perishables. Clear proof that this isn’t a one-time lift, but a real lasting shift in how our members shop with us. These results reinforce the importance of our core consumables franchise, which continues to demonstrate consistency even in a volatile operating environment.

In general merchandise and services, comps increased by 4.3%, which outperformed our expectations for the quarter, driven by changes in merchandise mix. While we are pleased with our progress, it’s important to note that general merchandise can be variable quarter to quarter, given the discretionary nature of many of these categories. As such, we would not expect performance at this level every quarter, but we are encouraged by the traction we’re seeing as our broader transformation efforts take hold.

Turning to membership, the foundation of our business and one of our greatest strengths. We ended the year with over 8 million members, a new high for our company. In comp clubs, this growth reflects strong acquisition, continued loyalty from our long-tenured members, and the ongoing relevance of our value proposition. Our growth was also the result of opening our 14 new clubs this year. Growing both the comp and total member bases is incredibly important to our future success.

For the fourth consecutive year, we achieved a 90% tenured renewal rate. This level of loyalty is rare in retail and speaks directly to the consistency of the experience we deliver and the relevance of the BJ’s membership model. We also saw continued strength in our higher-tier memberships. Penetration increased to 42% this year, demonstrating strong adoption of the enhanced benefits in our higher-tier offerings. These members are among our most engaged and the highest-spending cohorts, and we see meaningful opportunity for continued growth here.

What stands out this year is not just the growth in membership but the quality of that growth. The combination of more members, exceptionally high renewal rates and deeper engagement among our most loyal tiers reinforces the health of our model. It also gives us tremendous confidence as we look ahead because strong membership is the engine that powers everything else, traffic, share gains and long-term profitable growth. As our membership base grows in both size and quality, we continue to make it easier for members to shop with us whenever and however they choose.

Digital engagement remains a major unlock for convenience, and this quarter digitally enabled sales grew by 31%, driven by strong adoption of BOPIC, same-day delivery and ExpressPay. These services have consistently been among the most meaningful drivers of digital growth, with more than 90% of digital orders fulfilled directly from our clubs, an efficient and member-friendly model that has contributed significantly to our momentum.

Our digital business also achieved a milestone this quarter, posting its highest sales day ever on Black Friday and then surpassing that record again on Cyber Monday. This performance reflects not only high engagement but the continued maturation of our digital portfolio. We’re increasingly seeing members tap into our digital conveniences for different shopping occasions, underscoring how ingrained these capabilities have become. For example, a member stocking up in club ahead of a winter storm may be more inclined to use ExpressPay to make that shopping trip faster and easier.

We’re also continuing to lean into AI to create even more seamless and intuitive experiences for our members. Our AI shopping assistant, [Indecipherable], is designed to enhance the member experience through more personalized, intuitive and efficient product discovery and support. And behind the scenes, AI is enhancing our merchandising enrichment and platform reliability.

Value remains foundational to how we serve our members, and we continue to see that resonate across all income levels, particularly in a period where many consumers are becoming more selective with their spending. A strong pricing position is central to our model. Our advantaged structure allows us to consistently deliver meaningful savings, up to 25% better than traditional grocery. And we are relentless about maintaining that edge for members. This commitment to value is one of the reasons we continue to see steady renewal rates, strong traffic and healthy unit growth in our core businesses.

Our own brands are another important way we help members manage their budgets without compromising on quality. In fiscal 2025, own brands represented 27% of our merchandise sales, and we remain on track toward our long-term goal of 30%. These products offer significant savings and are an increasingly important part of how families shop our clubs. That loyalty, combined with higher margins, makes this effort powerful for our company. We also create value through compelling discounts and promotions. A recent example is our big game event, where members who spent over $150 got a $15 digital bounce-back coupon, providing members with a high-impact way to save during a key seasonal moment.

At a time when members are making careful decisions with every dollar, our focus on great prices, quality products, and highly curated assortments ensures we remain a trusted destination for families looking to get more value out of every trip. We continue to make meaningful progress on expanding our footprint and bringing the BJ’s model to more communities. In the fourth quarter, we opened seven new clubs, a great finish to a year that saw us open 14 new clubs. We are so proud of our 2025 class of club openings, which saw us open clubs in eight different states. These clubs as a whole are delivering sales, membership, and profit that are well above expectations, and we’re very excited for our continued accelerated club growth.

The success in our new clubs and new markets is a testament to the team working on new clubs, whose mission is to make the next opening even better than the last. The team is ready for our first half of the year openings in the Dallas-Fort Worth area, and I have tremendous amount of confidence that we will deliver for these new members and communities as we have proven time and again in our new club program.

We remain on track to deliver our commitment of 25 to 30 new clubs over 2025 and 2026. And as we look out at the new club pipeline, we would expect this pace of openings to continue over coming years. Our sustained expansion reflects our confidence in the relevance of our model, our ability to serve more members across more geographies, and our long-term commitment to profitable growth.

Before I hand things over, I want to take a moment to recognize our team members across our clubs, our supply chain, and our Club Support Center. Their commitment to taking care of the families who depend on us is what enables our performance quarter-after-quarter. Their hard work, especially in dynamic environments like this one, continues to inspire me every day.

As we look ahead, we remain confident in the strength of our model and our ability to execute on our long-term priorities. Our business is built to win in both stable and uncertain environments, and the investments we’re making today put us in a strong position to continue delivering value for our members and sustainable growth for our shareholders.

With that, I’ll now turn it over to Laura to walk you through the financial results in more detail.

Laura Felice — Executive Vice President, Chief Financial Officer

Thank you, Bob. Before I dive into the numbers, I wanted to acknowledge the exceptional work that our teams across our clubs, distribution centers, and support functions. Their continued focus on serving our members and strengthening our operations played a major role in delivering our fourth quarter results.

Now, let me walk through the financial highlights for the quarter. Net sales for the fourth quarter were approximately $5.4 billion, an increase of 5.5% over last year. Total comparable club sales, including gasoline rose 1.6%, with fuel prices continuing to run down mid-single-digits year-over-year. Excluding gas, merchandise comparable sales increased 2.6%, and we were pleased to see growth in both traffic and units. Traffic strengthened as the quarter progressed, helped in part by members stocking up ahead of the late January winter storm.

Within our grocery, perishables, and sundries business, comps were up 2.3%, supported by strong performance in categories like non-alcoholic beverages, candy, and snacks. Unit growth was approximately 1.5%, and price remained up year-over-year, though we have seen inflation continue to moderate. Our general merchandise and services division comp increased 4.3% in the fourth quarter, driven by strength in consumer electronics and apparel, even as home and seasonal remained a drag on the business.

Membership fee income rose 10.9% to roughly $129.8 million, supported by healthy acquisition and retention trends across the chain, as well as an annual fee increase in January 2025. Our membership base remains vibrant, and we continue making progress in improving member mix quality. As we look ahead, we expect membership fee income growth to moderate as we fully lap the fee increase and return to a more normalized run rate.

Turning to our gross margins, excluding gasoline, our merchandise margin rate was down about 50 basis points year-over-year, driven by changes in merchandise mix. SG&A expenses totaled $818.2 million, representing slight deleverage as a percentage of sales, primarily due to new club openings and continued investment in our key strategic initiatives. Our gas business outpaced the broader industry. Comparable gallons were up 0.1%, significantly better than the low-single-digit declines seen elsewhere. Fuel margins were generally stable during the quarter, resulting in profitability modestly ahead of expectations.

Adjusted EBITDA for the quarter increased 1% to $266.5 million, supported by steady cost discipline. Our effective tax rate for the quarter was 25%, slightly below our statutory rate of roughly 28%. Altogether, fourth quarter adjusted EPS of $0.96 increased 3.2% year-over-year. For the full fiscal year, we delivered adjusted EPS of $4.40, reaching the high end of our revised guidance range.

Looking at the balance sheet, inventory levels increased 3.1% year-over-year in absolute terms and were down 2% on a per club basis, reflecting strong execution by our teams. In-stock levels improved about 40 basis points versus last year and reached record highs, a testament to better merchandising alignment and operational efficiency.

Our capital priorities remain unchanged. We continue to invest in areas that drive long-term value, membership, merchandising, digital capabilities, and real estate. We ended the quarter with net leverage of 0.4 times, giving us substantial flexibility. During the quarter, we bought back approximately 1.3 million shares for $117.7 million, bringing the full-year repurchases to roughly 2.6 million shares for $252.4 million. This accelerated pace of repurchases underscores our confidence in the long-term strength of the business and our ability to generate consistent cash flow. We ended the year with approximately $750 million remaining under our current authorization and expect to remain thoughtful and opportunistic with future repurchases.

Looking ahead to fiscal 2026, we expect comparable sales excluding gas to grow 2% to 3%, and we are guiding to adjusted EPS of $4.40 to $4.60. Our multi-year focus on building a stronger, more efficient, and high-quality business is yielding real progress, and we remain confident in our ability to deliver sustainable long-term growth.

We expect slight deleverage in our SG&A driven by accelerated new club openings, particularly with continued outsized growth in depreciation. We will also continue to invest to ensure our new market growth performs at or ahead of our expectations, as well as making sure we deliver unbeatable value to our members every day.

We plan to further invest in our supply chain network to support the long-term growth, and are excited to open our automated distribution center in Ohio in 2027. We are planning for an effective tax rate of approximately 27% for the year, with the lowest rate in the first quarter when we typically experience a windfall from stock compensation.

Given the evolving landscape, we are not contemplating the impact of recent tariff news and evolving macro uncertainty on our current assumptions. Tariffs may shape the trajectory of inflation and broader consumer demand and ultimately influence our results this year. We continue to believe we are well-positioned to offer our members value that they are seeking every day.

Before I hand it back to Bob, I’d like to thank our team members for their continued dedication to our company, purpose, and communities, and their contributions to another great year of delivering in a dynamic environment.

Bob, back to you.

Bob Eddy — Chairman and Chief Executive Officer

Thanks, Laura. Before I wrap up, I just want to take this opportunity to reflect on the incredible progress our team has made on behalf of our shareholders. Looking back over the last three years, we have grown our member count by 1.5 million members. That’s over 20%. And increased our annual MFI run rate by more than $100 million while delivering 90% tenured renewal rates.

We’ve driven digital penetration from 9% to 16%, generated $3.3 billion in adjusted EBITDA, produced more than $2.6 billion in operating cash flow, including over $1 billion this year. We’ve opened 29 clubs as part of a $1.7 billion capital investment into our business, with returns on new clubs well into the double digits. We’ve accelerated the pace at which we’re expanding and have a pipeline to support this level of growth going forward. As part of this effort, we’ve also added about $500 million of owned real estate onto our balance sheet. On top of this capital investment, we paid down well over $300 million of debt, bringing our net debt ratio down to 0.4 times, and repurchased well over $0.5 billion worth of shares, retiring about 5% of our share count in the process.

The club business is a long-term share gainer and great business to be invested in because value wins. By delivering the assortment, value, convenience and membership experience our members love, we will be rewarded with growth in the lifetime value of our members. This lifetime value is the foundation of the equity value that accrues to our shareholders.

As we look out towards this year and beyond, we’re more excited than ever for both the progress we’ve made and for the opportunity to create even more value for our shareholders by investing for the long term and delivering value to our members in everything we do. We’re at a unique moment in time as it relates to the growth of the club channel. Now more than ever, we are here to play to win.

Question & Answers

Operator

Thank you, Bob. [Operator Instructions] And our lines are now open for questions. And we now have Michael Baker from D.A. Davidson. Go ahead, please. Your line is now open.

Michael Baker

Great. Thanks. I wanted to ask about merchandise margins down 50 basis points. In the press release, you said mix. I guess I heard strength in consumer electronics and TVs. I suppose that was probably part of it. But what else drove the lower merchandise margin? Can you talk about sort of inflation — cost inflation versus price inflation? I know one of the hallmarks has been trying to give value back to customers, just how that whole pricing dynamic is playing out, please? And what should we expect for 2026? Thank you.

Bob Eddy — Chairman and Chief Executive Officer

Good morning, Mike. Maybe I’ll take the lead here, and Laura can fill in behind me. So we are pretty proud of our quarter. You brought up margins in your question, and our pricing stance and a few other things. So let me just talk a little bit about it in the broadest sense, and Laura can add in some details as she sees fit.

The largest contributor to our margin performance against our expectations during the quarter was the mix of the business, and it’s mixed towards general merchandise. You remember that for us, general merchandise is slightly lower margin than some of the other parts of our business. And within general merchandise, consumer electronics tends to be the lowest gross margin within general merchandise.

You remember when we talked about how Q4 might roll out for us, we had restricted buys in a lot of our general merchandise categories to try and manage exposure to tariffs and markdowns and things. And that played out exactly the way that we thought it would. So within the four big businesses in general merchandise, we had a good quarter from a CE perspective. Our apparel business continues to grow. It’s been growing for a few years now pretty steadily, and had another good quarter there.

And then, as expected, we had a tougher quarter in our home and our seasonal businesses. Those were more subject to tariffs. That’s where much of our inventory cuts happened. And, those two businesses had negative comps. So the mix issues associated with that were the predominant cause of the 50 basis point decline in merchandise margins. We also made considerable investments in value during the quarter in our grocery business, and we will continue to do that in the future.

As you know, value is the most important thing that we provide our members every day. We take our pricing gaps very seriously. They improved during Q4 because of these investments that we made. And we’ll continue to do that as we can to provide our members the best value every day. You know, we always try and spend into the beat, so we saw that we were having a quarter where we could do that and decided to take that option on our members’ behalf. So we’re very happy with our quarterly performance, and made all the numbers work out in our shareholders’ behalf.

Michael Baker

Yeah, great. Thanks. If I could ask one more, you talked about continuing the pace of openings, 25 to 30 every two years. You’re only in 21 states right now. Have you — how long can you grow 25 to 30? I guess what I’m getting at is, have you looked at the art of the possible? Could this be a nationwide concept? How many stores could you have over time?

Bob Eddy — Chairman and Chief Executive Officer

Yeah. Let me start out and then Bill Werner can fill in. He obviously, as you know, runs our real estate portfolio. This year was a fantastic year for us from a real estate growth perspective, opening 14 new clubs, a bunch of new states, a bunch of existing markets for us as well. And I would tell you that this new class of clubs is the best class of clubs we’ve opened in any of the years since we’ve gone public.

Just a couple of data points. Our membership in these clubs is up over 30% versus what we planned. Our on-time renewal rates in our new clubs are about 900 basis points higher than our chain average at this point. And I talked about in our prepared remarks that our new clubs are well into double-digit return on capital. So, we’re really excited about the performance we’ve had so far. The team has done a fantastic job getting these clubs open on time this year. We’ve got another 12 or so to go in this new year and a really robust pipeline.

So, let me hand it over to Bill, and he can address the rest of your question.

Bill Werner — Executive Vice President, Strategy and Development

Yeah, Mike, maybe the one simple idea I’ll give for you and the investment community to think about as it relates to our growth is, as we continue to take share, the models continue to update the viability that we have to open up in new markets. And we’ve seen that this year with markets like Selma, North Carolina and Sumter, South Carolina. They probably wouldn’t have been on our radar a handful of years ago and in pretty short order, not only were they on our radar, but we were able to go there, execute, and those clubs are both off to amazing starts, which gives us a lot of confidence in terms of going into new and different markets into the future.

And so, I would tell you that we enter the Dallas-Fort Worth market later next month. Our team is confident, but certainly not complacent, as we go into these in terms of how we execute with the success that we’ve seen. And if anything, the early engagement and the hustle of the team on the ground there has been — in the Dallas market has been pretty awesome. We had — I was down there last week and spent some time with the team and with some community leaders, and we heard feedback across the board of the way that we’ve engaged with the community down there. It’s something that they’ve never seen before. And so, we’re really excited to get those clubs open. It will be a nice milestone for the company as we showed the success that we’ll have down there. And that success creates opportunity for the future. So as we sit here today, we’re really excited, we’re really confident, and more to come.

Michael Baker

Thank you.

Bob Eddy — Chairman and Chief Executive Officer

Thanks, Mike.

Operator

Thank you, Michael, for that question. Next up, we have Peter Benedict from Baird. Go ahead, please. Your line is now open.

Peter Benedict

Hey, good morning, guys. Thanks for taking the questions. So I guess first we’d just be kind of just around the merch comps. Any way to kind of quantify maybe how impactful Fern was, maybe some of the stock-up activity that happened at the end of the quarter in 4Q? And then, as you’re thinking about the year ahead here, any cadence we should think about? I know there’s a lot of puts and takes. Maybe your view on SNAP and the changes there, just anything that you’re contemplating that we should be aware of in terms of the cadence of comp in ’26? That’s my first question.

Bob Eddy — Chairman and Chief Executive Officer

Yeah, thanks. Good question. So obviously, Winter Storm Fern was a big deal, particularly in our footprint along the East Coast. I guess what I would say is start out with our feeling is largely storms are a net push. You get the buildup on the front side of it, and that can be a little buildup or a big buildup, depending on the size of the storm and how well forecasted it is. And then you obviously suffer the downside of storm effects, closing stores and power losses, and people not driving and deloading the pantry that they just loaded up. So I think on the whole, the storms are generally a push.

Fern was very big and impacted most of our footprint, and it was certainly very well forecasted. A week out, everybody was saying we were going to get a big storm. So we did have a pretty large buildup in front of the storm. And obviously, it was big and impactful. And so we had a pretty large fall-off after the storm. And so, I think the thing to think about is what the net impact of it was. And I would say it was a slight positive to the quarter, the downside of the pantry deloading and the travel effects, and such, and the supply chain effects actually crossed the fiscal year a little bit. And so we saw some of the downside leak into February, and I think this is a normal effect. I mean, we’ve seen some weather in the Northeast in February as well. And so February’s comps were a little lower than our plan, but all of that is normal weather stuff.

So look, I think our team did a great job serving our members. Certainly, we proved our destination status that stat that we put in the prepared remarks of beating our daily fuel volume record by 20% was pretty insane to do that. Our supply chain team really was pretty heroic, beating records of how many cases we moved day after day as the buildup happened. And our club teams did a wonderful job staying open when we could, keeping everybody safe and serving our members. So overall, a very slight impact to the quarter, and I would say a slight impact to Q1 on the negative side as well.

From a guidance perspective, maybe I’ll give that question to Laura. There’s certainly a lot to balance in the stacks and what’s going on in the world. So, Laura, what do you say about guidance?

Laura Felice — Executive Vice President, Chief Financial Officer

Yeah. Hey, good morning, Pete. Look, I think from a comp perspective, obviously, we put out a range of 2 to 3 for the full year. I think what we didn’t talk about in the prepared remarks is the cadence of the two-year stacks, and those accelerated slightly in Q4 as they did in Q3. And so when we look at the year coming up, I’d point towards the two-year stacks as a starting position. Remember that the first quarter of last year was the high watermark from a comp perspective. And so we’ve built the plan on that, which would imply kind of lowest comps in the beginning of the year and growth as we progress through the year.

Peter Benedict

Okay, that’s helpful. Thanks. And my follow-up is just maybe a little longer-term picture, the return to kind of the algo that you guys have. This year, there’s obviously a lot of puts and takes. You’ve got the investments that are going on. I’m just curious, as you — once you get a bunch of these new clubs up and running, when do you start to kind of maybe return the business, the model to the algo? Is that something that could occur in ’27? Is it ’28? Just conceptually, how does that work in your mind? Thank you.

Bob Eddy — Chairman and Chief Executive Officer

Yeah. Thanks, Pete. I mean, we are really taking a very long-term approach to what we’re doing here. Obviously, we talked a lot about our real estate growth that impacts our depreciation, and our EPS performance. But with all that said, I thought this is a pretty good year. We’re very proud of our progress. The growth of our entire franchise last year, growing total merch sales by more than 6%, membership by 7%, MFI by 9.5%, adjusted EBITDA by 6%, EPS by 9%. Those are all fantastic results.

And then in the prepared remarks, all the three-year stats, I think, are even more impressive. And so while we’re not satisfied and we still want to grow faster, we really have a lot to be proud of. We think our shareholders should be happy with our performance, and we’ll continue to make long-term investments like in real estate and like in value, to really get our franchise flywheel moving faster for the future.

Peter Benedict

That makes sense. Well, congrats on a good year and good luck.

Bob Eddy — Chairman and Chief Executive Officer

Thanks, Pete.

Operator

Thank you, Peter. [Operator instructions] Thank you. And let’s move on to Ed Kelly from Wells Fargo. Go ahead, please. Your line is now open.

Unidentified Participant

Hey, good morning. This is John Park [Phonetic] on for Ed. Thanks for taking my questions. I guess, can you talk a little bit more about the underlying membership trends? How much of the MFI increase was from the fee increase? And I guess, any changes in discounting lately that you guys are doing?

Bob Eddy — Chairman and Chief Executive Officer

Yeah. Good morning, John. Thanks for your question. Certainly, a lot to be proud of in our membership growth. We talked about a little bit of that in our prepared remarks, but 500,000 member growth this year, 1.5 million over the past three years, 10% MFI growth for the year, a little bit more than that for the quarter, another year of 90% renewal rates, improvements in our higher tier, really just sustained, fantastic performance in our membership base.

This continued growth in member count will continue, including with as many as 12 new clubs next year. And obviously, some of that MFI growth was the fee increase as you pointed out. We’re quite optimistic on our ability to continue to grow our membership franchise. And as we do, we’ll continue to optimize for the best mix of acquisition and retention and rate and MFI dollar growth. And as you might imagine, those things somewhat compete with one another. And so we’re trying to optimize the best result for our overall business.

When you think about the concept of discounting, I would take you all the way back to many years ago, when our chief acquisition model was a free trial model, and we moved away from that towards a discounted membership model tied to easy renewal. So folks that get a discount have to sign up for automatic renewal, and they pay full freight in the second year and beyond.

Most membership models use a discounting model at this point, including our two club competitors. And the team has done a really nice job again optimizing those three things: member count and the rate that the members pay, and the renewal rate. Team also does a nice job of varying and trying to optimizing the channels in which we offer these discounted offers. And they obviously change offer constructs and things as we go, really trying to figure out what the best value is for each segment of membership. And again, trying to optimize the overall business for us and for our shareholders.

So as we move forward, we’ll do a lot of the same, just trying to optimize what we offer and when we offer it and who we offer it to. And I expect we’ll see continued great growth in total membership and MFI dollars and renewal rates.

Laura Felice — Executive Vice President, Chief Financial Officer

The one thing I might add on to that is Bob talked about the new club growth and members we’re acquiring in the new clubs. As we step back and we look under the numbers, we’ve talked about this in prior quarters, we’re also really proud of the membership growth in comp clubs, which as you know, is really important to the long-term of our business. And so think about kind of 2% to 3% comp club member growth, which is a fantastic stat that we’re proud of as a company.

Unidentified Participant

Awesome. Best of luck, guys.

Bob Eddy — Chairman and Chief Executive Officer

Thanks, John.

Operator

Thank you, John. Moving on, we now have Kate McShane from Goldman Sachs. Go ahead, please. Your line is now open.

Kate McShane

Thank you. Good morning. We had a longer-term question as well. Just with the success that you’re seeing with your digital growth, do you think your stores are able to keep up with this level of fulfillment? And are there any investments that need to be made going forward to further support this growth, either in the tech stack or with assets?

Bob Eddy — Chairman and Chief Executive Officer

Yeah, hi, Kate. So it’s a good question. We’ve had sustained fantastic growth in our digital business. I think it was 31% this quarter and somewhere near 60% on the two-year stack, obviously even bigger going backwards. And it’s really been the engine of convenience that our members love, whether it’s buy online, pick up in club, or same-day delivery, or ExpressPay. Getting that penetration up to 16% of our business has been a big win. And I expect it to go even further as we go because our members, quite frankly, love all these offerings.

And as you know, about 90% of our entire digital business is fulfilled by our clubs. And so, you’re right to ask the question. I would tell you that we are relatively unconstrained from this perspective. We can pump a lot more volume through our average boxes. In certain very high-volume clubs, we have constraints. We are working around those constraints by investing capital, by investing in labor, by moving volume around the chain, by using different providers to help us do it. But I don’t really see a ceiling on our digital growth going forward. And we will work hard to make sure we don’t have a ceiling there.

We continue to invest in all of our digital properties. Our digital team is fantastic at really improving the experience every day on a relatively inexpensive basis. And they do it day in and day out. And when they say something’s going to be done, it gets done. And so we’ve come to very much value that as we talk to our members, as we offer new things to our members, and obviously, our members are reacting well to that. So I don’t really see that changing in the future. We’re happy to take all the digital growth that comes to us.

Kate McShane

Thank you.

Operator

Thank you, Kate. Moving on, we now have Steven Zaccone from Citi. Go ahead, please. Your line is now open.

Steven Zaccone

Great. Good morning. Thanks very much for taking my question. I wanted to follow up on the earnings guidance for the year. Laura, you mentioned some SG&A investments. Can you help us understand how big they are? And then on the merchandise margin outlook, I want to follow up there. How should we think about that for ’26? Obviously, mix was a factor in the fourth quarter, but you did reference earlier last year, making some price investments or investments in general to provide value for consumers. How do you see that playing out in 2026? Thanks.

Laura Felice — Executive Vice President, Chief Financial Officer

Yeah, good morning, Steve. Thanks for the question. Maybe I’ll start on your SG&A question. We spoke a little bit about that in the prepared remarks. And so, slight deleverage. I think we are continuing to invest in the new club growth and ramp that growth going into Texas at the end of the first quarter, as Bill talked about, and into the second quarter. We are certainly investing to win there. We know we are off to a strong start, as Bill already talked about as well, but we want to make sure we set ourselves up for success. So some deleverage largely as we look on the new club ramp, and it’s largely D&A.

From a merch margin perspective, we don’t guide to merch margins on an annual basis. I would say the fourth quarter was certainly the low mark on a year-over-year basis as we went backwards a little bit. But remember that the full year we rounded it out flat. So I think what we’re after this year is continuing to manage the business, make sure we’re making price investments where they make sense, all after kind of going towards our long-term lifetime value of membership and the guidance we’ve set forth.

Steven Zaccone

Okay. That’s helpful. Thanks very much.

Operator

Thank you, Steven. Moving on, we now have Mark Carden from UBS. Go ahead, please. Your line is now open.

Mark Carden

Good morning. Thanks so much for taking the question. I want to ask a bit about the Texas ramp. I know the stores are yet to open, but you’ve been doing some initial promos. How’s interest been just relative to what you’ve seen in other markets? And then, how have you handled any supply chain challenges just given distance from current DCs? Is there a set number of clubs you need to open before it makes sense to add a new DC to that region? Thank you.

Bob Eddy — Chairman and Chief Executive Officer

Yeah. Hi, Mark. Why don’t I ask Bill to take over that question?

Bill Werner — Executive Vice President, Strategy and Development

Yeah. Hey, Mark. Listen, the — maybe we’ll start with the engagement down in the Texas market, and then we’ll come back to some of the infrastructure. The engagement has been amazing out of the gate. I mentioned earlier, I was down there with the team last week. We’ve had a team on the ground for many, many months right now already engaging with the community, and we have a ton of data given the acceleration of all the recent openings in terms of what we expect from engagement and membership from the clubs that we opened so far. And as we sit here and look kind of 8 weeks to 10 weeks out from the openings, we’re seeing exactly what we thought we would see in terms of overall engagement and membership signups.

So, all signs are positive. We sit here so far in terms of the entry. I’m really excited. The team has just done such an amazing job. I’m really proud of everything that they’ve done, and I’m really excited to see the results of all their hard work.

In terms of the infrastructure, we’ve been planning for this investment for a while now. And so, we will — we’ll serve the market with a combination of distribution from our existing distribution infrastructure, as well as some hyper-local support on the ground. And then we’ll continue to scale as we’ve done all along. So, as I think about — as we’ve moved over the last handful of years, to some of the adjacent Western markets where we are today, as we moved into Columbus and Indianapolis and Nashville and Detroit, that certainly has created a new distribution footprint for us. And we’ve served that along the way, and we’ll continue to amplify how we serve that with the new distribution center that we’re building out in Columbus as we speak. That’s a major investment for us, and it will yield significant both operational efficiencies for us as well as savings as we get it open.

So, the opportunities that we have to invest in the expansion have been driven by the success of the new clubs. And it’s a great challenge to work through, and we’re excited for everything that we’re doing.

Bob Eddy — Chairman and Chief Executive Officer

Yeah. And we’re really bullish, as Bill said, about our ability to be successful in Texas. I’ll offer you one statistic we heard this week, that there are more homes being built in the Dallas-Fort Worth market than in the entire state of California. So, certainly a place with very, very high growth. Our team’s been doing fantastic work on the ground. The initial membership signups are well ahead of our pre-opening plan. Obviously, the numbers are small until the box is actually open. But the engagement we’ve seen with the folks in these communities that we will enter has been very strong. We’re obviously respectful of this challenge. It’s certainly got great competition in the neighborhood, and we want to make sure we offer Texans products and experience that they like. But I think we’re off to a pretty good start so far. And we will invest heavily in this market to try and get it right, and we will give it our best shot every day.

Mark Carden

Thanks so much. Good luck, guys.

Bob Eddy — Chairman and Chief Executive Officer

Thanks, Mark.

Operator

Thank you. Moving on to the next participant, we have Oliver Chen from TD Cowen. Go ahead, please. Your line is now open.

Oliver Chen

Thanks a lot. Hi, Bob and Laura. Regarding general merchandise and variability that you’re seeing, what should we expect in terms of guidance with home and seasonal? And related to that, the category management program, as well as Fresh in the year ahead, any major catalysts there or changes or more innovation that you’re doing there that will underpin some of the comp guidance? Thank you.

Bob Eddy — Chairman and Chief Executive Officer

Yeah. Hi, Oliver. Thanks for your question. Again, maybe I’ll start, and Laura can fill in whatever I miss. If you look at the complexion of our business in the fourth quarter, you saw quite a mix. Our grocery business performed very, very well. Certainly, perishables is the most important part of that business. We lapped the full chain rollout of Fresh 2.0 during the quarter, and we continue to see steady gains in our perishables business, that’s been impacted by some food deflation in that category. But even without that, perishables had a good quarter.

We saw some improvement in our grocery business, and hopefully that translates into our sundries business as well, as we start to pull some of the same levers there. And general merchandise, we’ve talked a little bit about where we had a good quarter from a CE perspective, where we could chase some inventory and sell it. And I think the prospects for our home and seasonal businesses are kind of varied at this point in time. We need to continue to improve our merchandise mix, and our assortment, and our value in those categories.

Our merchandising team has made strides, and they continue to get better. We obviously are still working on our merchandising team at this point, and we hope to have some news to announce in the next couple of weeks from that standpoint. So I would look at home and seasonal as a longer-term growth initiative. We will continue to grow CE, we will continue to grow apparel. We know what to do in those categories. And in the future, we hope to build on that growth in home and apparel.

And with respect to CMPs, that program is still going on. It’s been a successful program for us. As you know it versus our older program, we called CPI, which was much more margin-focused, this has been much more assortment-focused. And I think what you’ll see from us in the future is a better mix of those two thoughts. I’m trying to put the right thing on the shelf, but also trying to get some more margin performance so that we can make some further investments in value, making sure that we are offering the right everyday price, the right promo, the right product. And obviously, paying the right cost for that product is a fundamental part of the retail equation and making sure we can run the business in the best way for our members and our shareholders. So lots of good stuff to be proud of in the merchandising world, and lots of work to come in the future.

Oliver Chen

Thanks a lot. Best regards.

Bob Eddy — Chairman and Chief Executive Officer

Thank you.

Operator

Thank you, Oliver. Next up, we have Rupesh Parikh from Oppenheimer. Go ahead, please. Your line is now open.

Rupesh Parikh

Good morning, and thanks for taking my question. So, just going back to inventory. I know last year your team planned conservatively on the discretionary front, just given some of the tariff headwinds and uncertainty out there. Just curious how you’re thinking about inventory over this year? Do you feel like you have sufficient inventory in the discretionary side? So just high-level thoughts there. Thank you.

Bob Eddy — Chairman and Chief Executive Officer

Yeah. Hi, Rupesh. I think our inventory is in great shape. Let me first congratulate our supply chain team and our merchandising team for their another great performance this quarter, where although total inventory was up 3% on a per club basis, it was down, and our in-stocks improved by 40 basis points. So team continues to do a great job getting better and more efficient for our members. We need continued gains on that front, and our team has got some great plans to keep pushing in that regard.

With respect to total inventory levels in the business going forward, nothing really to think about from a grocery business perspective, that is just about optimizing what we’re doing there. From a general merchandise perspective, we have ramped up our inventory in the coming year, we’ve made bigger buys to support both the new clubs that we’re bringing on and hopefully comp growth in our general merchandise business as well. And so where we were very conservative last year from an inventory buy perspective, we are being slightly more aggressive this year. Nothing crazy, but we do have plans to buy more inventory, and hopefully, we’ve picked the right items, and our members love the assortment and the value that we offer.

Rupesh Parikh

Great. Thank you. Best of luck.

Bob Eddy — Chairman and Chief Executive Officer

Thanks, Rupesh.

Operator

[Operator Closing Remarks]