Good morning. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the BJ's Wholesale Club Second Quarter Fiscal 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Faten Freiha, Vice President, Investor Relations. You may begin your conference.

Thank you. Good morning everyone. We appreciate you joining BJ's Wholesale Club's second quarter fiscal 2019 earnings conference call. Chris Baldwin, Chairman and CEO; Bob Eddy, Chief Financial and Administrative Officer; and Bill Werner, Senior Vice President, Strategic Planning and Investor Relations are on the call. Chris and Bob will provide you with an overview of our results, followed by a Q&A session. Before we begin, please remember that during this call, we may make forward-looking statements within the meaning of the Federal Securities Laws. These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations described on this call and in today's press release. Please see the risk factors section of our Form 10-K filed with the SEC on March 25, 2019, for a description of those risks and uncertainties. Finally, please note that on today's call we will refer to certain non-GAAP financial measures that we believe will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release posted on the Investor section of our Web site for a reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. With that, I'll turn the call over to Chris.

Good morning and thank you for joining us. Our second quarter results reflect continued progress as we transform BJ's Wholesale Club. Our performance was in line with our expectations despite challenging weather conditions earlier in the quarter. We also delivered very strong free cash flows which exceeded our internal expectations. For the quarter, we saw our merchandise comp sales of 1.6% representing a 3.6% two-year stacked comp. Sales were negatively impacted by particularly cold and rainy weather in the first half of the quarter. For context, New York and Boston had twice as many rainy days this May compared to last year. After the slow start, our performance improved significantly in June and July, and we ended the quarter on a strong note. At the same time, we managed inventory extremely well. We are pleased with our improved sales trends and are well positioned to deliver on our expectations for the full year. Adjusted EBITDA was $153 million, up 7% over last year. We continued to drive strong cash flows and we ended the quarter with funded debt at 2.9x adjusted EBITDA. Throughout our transformation, we continued to invest in capabilities that will deliver long-term growth. We remain focused on our strategic priorities. First, I'll provide an update on acquiring and retaining members. We delivered another quarter of record membership fee income, supported by increases in members, higher tier memberships, and renewals over last year. We continue to use a data-driven approach to attract new and lapsed members through both physical and digital channels. In Q2, we nearly doubled the percentage of members acquired through digital channels over last year. Digital channels are particularly important in attracting younger members, and we continue to see great opportunities in this area moving forward. As we have said before, we use various membership…

Thanks, Chris. Good morning everyone. We are pleased with our second quarter results despite challenging weather conditions early in the quarter. We recovered nicely in the second half of the quarter and remain on track to deliver on our full year outlook. Importantly, the underlying fundamental drivers of our business remain strong and we continue to successfully execute against our strategic priorities. Let's turn to our results for the second quarter in a bit more detail. Net sales increased by 1.1% to $3.3 billion, comp sales increased by 0.6% including a negative 1% impact from sales of gasoline, the cost of which deflated versus the prior year period. Merchandise comp sales which exclude gasoline increased by 1.6% driven primarily by ticket and reflected a 3.6% two-year stack comp. As Chris mentioned, we experienced exceptionally rainy and cold weather across our markets in the first half of the quarter which impacted traffic. We did see a solid recovery in the second half of the quarter. We estimate that the weather impact versus last year was worth a bit more than half a point of comp sales. Let's turn to our comparable sales by division. The general merchandise business led our growth with a 6% comp reflecting a 10% through year stacked comp. We saw strong growth across various categories including gift cards, seasonal and toys. Summer seasonal categories such as patio sets and air conditioners were impacted by weather in the first half of the quarter, but recovered well as weather improved in the second half. This recovery illustrates the strength of our general merchandise assortment and the value we provide for our members. In our perishables division comps are flat for the quarter. A number of categories tied to outdoor entertainment and celebrations and early season cookouts got off to…

Thank you. [Operator Instructions] Our first question comes from the line of Robby Ohmes from Bank of America Merrill Lynch. Your line is open.

Good morning guys. Two quick follow-up questions. The first is on the higher tier memberships that sound really great. Could you remind us what -- how different the higher tier memberships are in terms of total spend and frequency – just can you give us anything you can share with us on how they performed versus other members? And then, my other question was, if you could just give us an update on your newer stores like Somerville, et cetera, how they've been performing this quarter? Thanks.

Thanks Robby. Good morning. I’ll take the questions in order. The higher tier memberships, I think, simply said are our best numbers whether they are -- in our rewards tier whether they pay additional membership fees in exchange for rewards back on their purchases or whether they are part of our co-brand card program or both. You can imagine that the lifetime value of these members increases as their engagement with us increases, and so someone that is in our rewards tier and has the co-brand card is our highest value member in terms of lifetime value by quite a wide margin. So, we have been pressing pretty hard on this program investing in technology at the front-end to gain these additional members that we've talked about 27% is a historically high number for us, it comes on the back of that technology where now we can bind people up at the register as opposed to just our membership desk. Simply said, these members visit us more often, buy more when they're with us. They renew at markedly higher rates. So, our company average renewal rate is 87%. Somebody that's in the rewards tier and has a co-brand card renews at somewhere around 99%. So, you can imagine these are our best members. We go out of our way to make their experiences as good as possible. In terms of the new clubs, we are pretty bullish on the overall performance of our club portfolio. You know that we've totally reinvented the process on how we locate new clubs and open new clubs, and I would say that the new crop of clubs we've opened in the last couple of years are generally pretty good. We're excited about our entry into Eastern Michigan. The advertising campaign that we have out there is totally new for us, uses a little bit of humor to introduce our brand to the Detroit market, and we're really investing heavily behind that. We’re looking for really good things out of the Detroit market.

Robby, just to add one thing, on both of those points and I will be glad to take your follow up, if you have it. I think on both dimensions, whether it's our credit card portfolio or our new clubs, our company is now playing to win, and the ability to take the right people, put them on the right assignments and deliver the performance they've delivered over the last several years is something that's encouraging. And it's -- I know we can't measure culture in the context of our financial performance, but I believe actually it's a really solid indicator of the company's shift in how we approach the opportunities we have in front of us. Did you have a follow up, Robby?

Yes. My follow-up, which is actually on the -- can you update us the penetration of the credit card?

Yes. We’ve disclosed the total premium memberships, of which credit cards are in there. And I'll reinforce what Bob said is that one of the primary benefits of the credit card to our members is our extra dime they get on fuel purchases. So, the 27 number is the number we talk about, it's 400 bps of expansion in penetration over the last couple of years, and the performance of the card is largely reflected in, not only the higher renewal rates but our ability to grow share and fuel, which we feel really good about.

That's great. Thanks so much.

Thanks Robby.

Our next question comes from the line of Edward Kelly from Wells Fargo. Your line is open.

Yes. Hi, guys. Good morning. First, I just wanted to ask you about the comp and the 50 basis point weather impact. It sounds like normalized comp maybe just over 2%. I'm just kind of curious, how did July actually look? And then, what are you seeing so far in August?

Sure, Ed. I think you got it right. Bob made a comment about a little bit more than half of -- 50 bps of impact early in the quarter. So, think about the last two months of the quarter is above the midpoint and we feel good about how we are starting the back-to-school season, which is quite encouraging for us. We're kind of holding on to that run rate as we start. I'm not going to make a lot of specific comments about this quarter, but we feel good about the start.

Okay. And then the update on the tariff situation, obviously encouraging. Can you just clarify the -- when you say $5 million tariff risk to plan, I guess what's in guidance for tariffs at this point? I mean just kind of curious because prior quarter, I don't think the guidance really included full mitigation. So, I'm kind of curious as to how we should think about guidance today versus what you said last quarter with the tariff issue and whether I guess what I'm trying to ask you is underneath of all that, is the guidance actually going up?

I guess the way I think about it that is, we're trying to give you enough context to think about the tariffs in the context of our whole plan, right? We only know what we know today, it could change at any moment. This is certainly an evolving and fluid topic out there. We're just trying to give people a sense of the max exposure that we see to the back half plan, right? Certainly 3% of our cost of sales in the back half is a larger number than 5 million and we've got very, very solid plans to mitigate the large degree of that. And we're continuing to work on the rest of it. So, I think we're just trying to give people a sense of how much our earnings could potentially vary and since the 5 million is within the overall range of our guidance, we feel like we can mitigate the whole thing.

Right. And then, just last one for you on share repurchase, so you bought back stock during the quarter, you're below your stated leverage target, I guess how should we think about the opportunity to repurchase stock going forward? You obviously generate a lot of cash flow. I know you talked about an update in Q4 of that, just kind of curious, is there anything else you could share around the companies view about use of cash in that area of leverage target?

Yes. I think I covered that in the prepared remarks. And certainly, we will continue to pay down debt. We know that that will be a priority as we go forward getting under the 3x funded debt to adjusted EBITDA level was really a near-term target. If you look outside of our balance sheet into our peers everybody is a little bit lower than that. But 3 was our target coming out of the IPO and certainly happy to have met that much faster than we had anticipated. But, we'll continue to pay down debt. I think we'll work with our board as we go through the next few months to determine an overall capital allocation strategy as we go forward. I would anticipate that that over time it would include continued debt pay down as well as opportunistic share repurchases and potentially a dividend. We just haven't settled on any of the formulaic nature of that. So I don't want to make any headlines with it. But, I do think we are very cognizant of both our desire to continue to delever as well as to return capital to shareholders at appropriate levels.

Great. Thank you.

Thank you, Ed.

Our next question comes from the line of Chuck Grom from Gordon Haskett. Your line is open.

Hey, guys. Good morning. Good quarter. So, if you could provide an update on the SKU [lattering] [ph] effort, and then looking at where you are on that journey? And then also, how we should be thinking about the opportunity in general merchandise front in the second half of the year. And I guess at what point do you think, you could start to see the mix of that business revert back to where you were say 5 to 10 years ago?

Hey, Chuck. We've tried to be -- thanks for your question. Across SKU transformation we've tried to be clear with folks that we started several years ago. I just started my fifth year at BJ's and probably in year 1.5 and 2. We realized what an opportunity we have made -- we had in front of us in general merchandise. So, Lee Delaney and Chris DeSantis, who lead our commercial operations, Chris runs our general merchandise business among others. Have done a really terrific job of heightening our assortment and just getting better across the board. Our seasonal performance was quite good this quarter and we did it with materially less SKUs than we had in the year ago period. And that gives us confidence that we can continue to make progress. So, we have a variety of tests going on now. I've spoken publicly about our need to heighten our grocery assortments. We think about it as we start with a couple of clubs, go to a couple of dozen and go to more after that. So, it takes a little bit of time, but I'm willing to be criticized for the speed because I think getting this right is more important than doing this fast. So, we have some grocery tests in place now. We're optimizing prepared foods, which we've just expanded to a larger set of clubs, which we feel really good about given the rising level of family formation in the Hispanic community, we've improved our ethnic food offering, which we are starting to expand. And we're going to be continue to be rational and disciplined in how we make progress. We're going to avoid giving people a SKU target because that's not we -- we don't think that's the right answer. But, at this point, we feel good about where we are and we're going to continue to push on it grounded in our experience in general merchandise.

Okay, great. That's helpful. And then, I think another sort of bigger opportunity for you guys longer term is to recapture lapsed members. So, I know it's a focus for you, just like you've given some pretty good details today and some new statistics which is helpful. Just maybe you can frame that out for us where you are on that journey?

I think it's still early. So, as you think about our -- one of the things that I'm really encouraged by is, when we -- build clubs in fairly dense markets. We've been able to attract members who don't see us as convenient as we would like them to see us because of our locations. I mean you live in a very densely populated as I have. So Carney, New Jersey is a place where we were able to attract a substantial amount of lapsed members because our next closest club, while it's only four or five miles as [indiscernible], a 25-minute drive given the traffic in that part of the geography. So, stay tuned on our -- we were probably heading down the path of a little bit more density and then less. And the other thing that I think is important is, we have a new data model that we've invested in that allows us to target members at the household level versus at the essentially the zip code level. And that will be coming on live later this year. And you've heard us speak about an emerging capability and personalization that's a big one for us that we're out yet with. But, it will continue to drive our ability to get to targets at a household level, which is a big part of how we're trying to run this business for the long-term.

Great. And then, just what was it -- for Bob on the gross margin line, you even talked about that the core being up 30 just wondering if there's any markdown pressure in the quarter to get your inventory levels to where they were. And then, looking ahead how we should be thinking about the core margins in the back half of the year particularly given this [Technical Difficulty] in the third quarter. Thanks.

Look, I think we were pretty happy with 30 basis points of -- approximately 30 basis points of growth during the quarter given where we started the quarter from a sales perspective and our seasonal businesses we came out of the quarter clean from that standpoint. And I wouldn't say, we really had any inordinate amount of markdowns during the quarter. I think the merchandising and logistics teams here did a nice job managing inventory levels overall given the slow start. So, we're very happy with the inventory levels as we came out of the quarter. As you look forward through the rest of the year, we do see continued opportunity to grow our margin rate. We plan for the margin rate gains to accelerate a bit as we went through the year here given how we were lapping last year's rate increases and what we were seeing from a CPI program perspective and how those gains would layer in throughout the year. So we're still feeling like we should have strong gains as we go through the back half and gross margin rate and we will work hard towards that venture.

Thank you. Best of luck.

Thanks Chuck.

Our next question comes from the line of Michael Montani from Evercore ISI. Your line is open.

Hey guys. Good morning. Thanks for taking the question. Just wanted to ask first off on the gross margin side, if you could break out the particular benefit from the CPI initiative in the quarter? And then, also where the private label penetration is at currently and just how quickly that's growing? And then, I had a follow-up.

Hi, Mike. We don't really give all that much color beyond the gross margin rate numbers that we've talked through. CPI certainly has been the primary driver of our growth and gross margin rate throughout the past couple of years. And this quarter, we were talking about today it was no different. Certainly, there was some benefit from private label in there. But CPI is the biggest driver buyout by a wide margin. I believe penetration then stood at about 21% at the end of the quarter. We continue to work very hard to grow that business make sure that we are building the brands that our members like. And as we go through the SKU rationalization and continued CPI program that we view private label as an enabler of that entire project and you will see us do more things like we've done in the baby category where we took out one brand and left one brand and one private label that will -- in order to the benefit of the private label penetration as we go forward and provide outstanding value on high quality products to our members. So we're proud of where we are. We've got a whole lot of runway to go from our private label penetration perspective. If you look at our peers, their number start with a 3 not a 2. So, we've got a lot of room to go, but we're pretty proud of where we are so far.

Okay. Thanks. And then, if I could, just any way to quantify or think about the magnitude of the fuel impact in terms of EPS for the quarter. And secondly, would just be around the efforts that you all have in place for personalization as well as kind of reassortment in grocery and multi-channel. Just wanted to dig in a little bit deeper into some of those company specific drivers and how we should think about those layering into the comp over time?

We don't give a whole lot of color on fuel profitability either Mike. It certainly was increasing profitability over last year during the quarter, but it wasn't the biggest driver by any stretch. You mentioned personalization as well. I guess what I would say to that as we continue to invest behind that capability, certainly the investment in the testing programs that we've put forward today would indicate that personalized offers are pretty much always better than just a blanket offer that goes out to folks. We certainly are taking advantage of that thought. This is a really long-term effort as we continue to figure out how best to both get members as Chris mentioned we will really start to personalize offers with this new data model that we're getting from a membership perspective and do some of the things that we've done from a perspective of getting folks in the club to shop and when they're in the club buying more. Those have already been effective as we do it. So, we'll continue to work down that road and layered in over time. I would expect you won't see too many gains from the new data model and membership until next year at the earliest as it goes online later in the year and personalization will only continue to build as we go throughout the next few years.

Thank you and good luck.

Thanks Mike.

Our next question comes from the line of Chris Mandeville from Jefferies. Your line is open.

Hey. Good morning. Chris, I hate to belabor it, but just to go back to your comments about momentum heading into Q3. Is there anything that you can provide in terms of additional color around the reason outside of weather if there are any on why trends improved markedly in the back half of Q2? And based on the comments of momentum heading into the back half of this year, does that apply as well to the two-year stack on sales as well as EBITDA growth. Because if I recall correctly, you were simply expecting at the beginning of the year to see EBITDA growth in Q3 maybe up above Q1 results? But, maybe that's changed to some extent based on what you're seeing today?

I'll let Bob comment on EBITDA. Let me make some comments on momentum. There is no question -- I mean the majority of people on the call probably live in the Northeast and you know well, the weather wasn't in -- we hate talking about weather, but the reality is, it's something we can't control. So, we wanted to be open about it. But, as the weather improved in our ongoing work we've done on improving the performance of the company continues to resonate well. And if you look Chris over a period of time, since we've been reporting the range of our top-line outcomes have been pretty consistent. There's not a lot of variation. And so, as you think about that, we feel really good about how we exited the quarter. We feel good about how we're starting. And in terms of EBITDA cadence Bob can probably make a few comments.

Yes, Chris, on EBITDA what I would say is to echo the prepared comments, we expect pretty strong growth in EBITDA in Q3 and I would say that's similar to the growth we saw in Q2 from a percentage perspective maybe a touch higher. And in Q4, we would expect lower growth or maybe even to go backwards and touch given what happened to last year's Q4 in the gasoline business that was such sort of a moment -- like in the gas business last year that it will be tough to comp that. Other than that, we haven't given too much color on specific numbers for the quarter.

And then, just last follow-up being on the non-edible performance in the quarter, it looks as though the two-year stack is settled fairly decently. Maybe I missed it, but any reason as to why that was outside of just general weather dynamic?

I think its weather and some promotional cadence that we probably self-inflicted as we did some new promotional capabilities. We had some -- this is in terms of the cadence of offers at different points in time in the quarter. But, largely its traffic oriented early in the quarter and then we feel a lot better coming into the back half of the year.

Great. That's [indiscernible]. Thanks.

Thank you.

Our next question comes from the line of Peter Benedict from Baird. Your line is open

Hi, guys. Good morning. First question, just on the MFI growth it sounds like from your comments, the underlying growth non-fee increase related was basically 3% to 4% pace over the first half of the year, first is that right? And then, how are you thinking about that as we look out over the second half of the year?

Yes. Hey Peter. I think you're exactly right. Certainly the prepared comments had a little over half of the growth, so that would get you right to 3% to 4%. We're very happy with that growth. As you know the effects of the fee increase weigh-in throughout the year, so we will get back to MFI really mirroring what's going on in -- just the member base in terms of number of members and in the complexion of the membership in terms of the fees that people are actually paying. So, we are pretty pleased. We saw nice increases in new members. Good performance in membership acquisition campaigns relative to the newer clubs that we have out there. We saw some really nice numbers from a renewal perspective during the quarter. I think Chris mentioned 60% of our folks almost are into the easy renewal program. I think that the numbers that Chris talked about from a higher tier membership perspective are incredibly impressive to jump out that much in penetration in six months is pretty unheard of. We certainly do that. We would get a nice big jump from the technology, we deployed at the front-end, but that was kind of surprising at least to me. So, I feel like we're going in the right direction from an MFI perspective and as we go through the back half, the drivers really will be no different. We'll certainly continue to work very hard to sign-up new members. Hopefully the momentum from a renewal perspective will continue and same comment on the higher tier memberships that's incredibly important as we go forward as I talked about earlier, those folks are our best members and our highest lifetime value members. So we will invest behind that program all day long.

Good to hear. Thanks for that. And then, just on the strategic consulting fees that you guys have had about, I think 11 million so far. I think that the guidance for the year is around 12. Just curious can you remind us what services are being provided there? And then I guess what -- I guess they're not needed going forward, but how are we thinking about this strategic consulting line? Thank you.

Hey, Peter. It's Chris. It's largely done and the work was largely related to our CPI initiative, which we've insourced and we've been weaning off and we've done quite a bit of work with the external resources on personalization which we feel good about. And we've insourced all of those functions.

Okay. Terrific. Great. Thanks guys and good luck.

Thanks Peter.

Our next question comes from the line of Karen Short from Barclays. Your line is open.

Hi. Thanks for taking my question. Just one housekeeping, then I had a couple other bigger picture. Can you just give us inflation in both food I guess and non-food in the quarter?

Good morning, Karen. Inflation, deflation was pretty flat on the whole business. Certainly, we saw some deflation within the food business particularly in dairy and then some offsetting inflation in other areas of the business to get the company more or less flat for the quarter.

Okay. And then, on the call you kind of gave that statistic in terms of the percent of sales that are coming from trial membership. I'm actually wondering if you could give a little color on and say what that person would have been and say 2016, 2017 timeframe?

Sure, Karen. This is Chris. Since I made the comment let me make it. This is one where we wanted to be on the nose on this subject because of some of the reporting that's been done around this. That's just wrong. So that number was probably mid-single digits, five years ago. So, over the course of the last couple of years, we have all worked as a team to my point on playing a win of reducing the company's dependence and there's some headwind in that on trials and now its de minimis. So, one of the things we thought was important for investors to hear directly from us that anything anybody talks about on trials is just, it's kind of noise because it's so small. I'm not saying we're not going to do it again because we have invested in the capability to convert people who come into with a trial offer to convert them. We've materially improved our ability to convert them in the club, but it's tiny. So, we just wanted to be on the nose on that subject.

No. That's very helpful. Thanks.

Sure. Thank you.

Can I ask one more question?

Of course.

Sorry. On the promotions, I guess there was a lot of noise in terms of what you may or may not have been doing, I guess with vendors this quarter. But, you made some -- gave some color in terms of new promotional capabilities in terms of percent off and then dollars off on buying multiple items. Can you just give a little bit more color on that like what was required from the systems and a process perspective in terms of being able to suddenly to now have those capabilities. And then, you know what the reaction kind of was from the vendors, but also just from the customers?

Yes. We also wanted to be on point on that subject as well. Here's that -- I've been on both sides of this conversation, I spent a good chunk of my career as a supplier to retailers like BJ's, now I work at BJ's. So, I can see both sides of this. The company up until the last literally few months really promotional had the ability to do a $1 off, $2 off, $3 offer or $4 off coupon period. So as we have done a variety of -- we have made substantial investments in our IT capability to drive the long-term health of the business recognizing having sold brands to retailers like BJ's, $1, $2, $3 or $4 off coupons aren't always the appropriate way to merchandise a category. As an example, a lot of times you would do hair care products with buy shampoo, get conditioner free to dry trial. We could not do that systematically. As we have worked through that, our total promotional spend is actually down year-on-year and we're working with suppliers to make sure we redeploy that money as efficiently as possible. And we feel really good about our ability to be much more efficient with promotional spend. Let me apply that to -- you can apply that across categories including fuel where we're now -- we have a very efficient way to deploy fuel promotional dollars with certain items that yield to the member at $0.10 per gallon discount at the pump. We call it high octane. If you think about an average 12 gallon fill up, it's a dollar 20 coupon versus what used to be a $2, $3 or $4 dollar coupon. And when we do that it's a very efficient spend. So, we're going to make sure we're getting all of the promotional support we deserve. I also think from -- some of that noise came out there when we were quiet. But I would hope investors want us to be tough with suppliers. At the end of the day, we feel really good about what we've done and we will continue to feel really good about what we're doing and driving this as efficiently as possible is important part about how we're running the company.

Great. Thanks very much.

Sure. Thank you.

Our next question comes from the line of Chuck Cerankosky from Northcoast Research. Your line is open.

Good morning everyone. Could you talk about the SG&A line a little bit please and talk about what you leveraged during the quarter where that might have been some pressure points and what are some of the ongoing strategic projects that are baked into the number that are putting a little pressure on it?

Good morning, Chuck. I guess what I would say about SG&A is, we continue to invest in the company behind all the strategic initiatives. We've been speaking about this morning. Some of those are obviously more expensive than others and more impactful than others, but we believe in all of them that is driving SG&A up a little bit, but we wouldn't be investing those dollars if we didn't -- if we didn't believe in each of the programs. Some of the bigger ones certainly are targeting having the right people in the right places. So think about the discussion on insourcing CPI and personalization efforts that that has obviously caused us to add payroll here in our home office rather than pay consultants to help us. I think the overarching way that we think about it, Chuck is that, we are using the gains in CPI and private label and gross margins to fund the investment in the business for the long-term, just trying to create a bit of a flywheel for growth as we go forward. So, we'll continue to invest behind the programs that we feel strongly about and trying to figure out ways to pay for them going forward where we're showing the results and the comp as we've come off of declining comps from the past few years and it's a positive comps now for a number of quarters and we're growing profitability as well. So, if we can grow the top-line and the bottom-line, we'll continue to do what we're doing.

Anyway to quantify that Bob? What sort of core and what strategic in the SG&A line?

Not really. I mean there's certainly some core increases in there as well. So, think about minimum wage pressure, I think for the year that was minimum wage adjustments are somewhere in the neighborhood of $10 million. But, there's some of that pressure rolling through, but we've tried to really approach the core inflationary pressures in the business with a methodology to try and offset them with other efficiencies. That isn't always possible, but our team as a whole has really flipped the company's culture a little bit from an inflationary cost increase perspective. So, as an example are our field organization has done a really nice job in our clubs and in the structure above the clubs trying to figure out ways to mitigate minimum wage and headcount increases in the field. So that we can give our members the best experience and give our investors the best return. We continue to do that going forward and balance that and investment and the requirement that we feel to give our investors the return that they deserve.

All right. Thank you. Good luck in the second half.

Thanks, Chuck.

Our next question comes from the line of Laura Champine from Loop Capital. Your line is open.

Good morning. Thanks for taking my question. It's a follow-up on your premium memberships. We've noted that in the clubs, there is some aggressive marketing of those upgrades. How different is that from what you've done historically and how do you get comfort from -- comfort in the thought that those premium members will perform as well as they have historically, if they may not be organic without those promotions to get them to sign on for the upgrade?

Hi, Laura. Good morning. Thanks for the question. Certainly, we started with a simple thought that the premium memberships are incredibly valuable as I stated earlier those members are our best ones. They have our highest lifetime value by orders of magnitude. So, we will continue to invest behind that program. The programs we've been putting in place to do that start frankly with the people behind the desk. We've made tremendous investments in the past year. This runs towards Chuck's SG&A comment on the last question too, getting the right people behind the desk. Getting them trained the right way, making sure that we are presenting the right image to our members and prospective members and making sure that those folks know how to best talk to our members about the value of the premium tier membership. Then comes technology, getting folks to sign-up or renew at the register. So, think simply again trying to unify behind a simple thought. We have 120-ish million transactions a year about, 10 million at their membership desk and 110 million at the register. So, if we can harness the power of that throughput at the register to grab more premium memberships, we will do so. And the technology we've deployed allows us to do that. So, that's a big one. And we will -- we constantly try and build the value of those programs over time as well. So, we will look in the future to try and do that as we go forward. But, it all starts with the people. We've got to get the right folks at the desk saying the right things to our members and certainly our team in the field has done an outstanding job in doing that.

Got it. Thank you.

And our final question today comes from the line of Christopher Horvers from JPMorgan. Your line is open.

Thanks. Made it in under the bar. So, my question for you is, as you think about the back half guide, how are you thinking about the general merchandise category versus the perishables and edibles -- the other -- those other consumables categories. Are you expecting acceleration in the non gen March categories, or do you expect gen march to continue to break stacks? Just curious how you're planning the underlying business?

Hey, Chris. I want to be really thoughtful about how we talk about guidance here because we feel good about the first half of the year and we feel good about the full year guidance we've provided. And that and we're going to just stick by that. In terms of general merchandise, the work that Lee and Chris DeSantis and the whole team have done to transform our GM business is foundational to the transformation. I want to maybe slightly correct what I said earlier by, we feel really good about the future and our ability to improve our business with a more efficient assortment. I probably said materially lower, it's lower, but not materially lower particularly in our core business in terms of number of SKUs. And as we think about whether it's apparel, or our TV business going into the back half and the expansion of our credit card business where people get rewards for buying big tickets. We feel pretty good about that and we expect it to continue to deliver improvement in the rest of our business as well. So overall, we feel good about guidance overall for the full year. The tariff situation was small for us, creates uncertainty for all retailers that we think we can manage. And we expect to continue to see improvement which is reflected in our full year guidance. Bob, you want to add anything to that.

No. I would have said much of the same.

Understood. Best of luck. Thanks guys.

Thanks Chris.

I'll now turn to the presenters for closing remarks.

Thank you all for your support and we look forward to seeing you on the road. We'll be out quite often in the next couple of weeks and we look forward to seeing as many of you as possible. Thank you for your time.

This concludes today's conference call. You may now disconnect.