Good morning. My name is Sharon, and I will be your conference operator today. At this time, I’d like to welcome everyone to the BJ's Wholesale Club, Fourth Quarter Fiscal 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there’ll be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Faten Freiha, Vice President, Investor Relations. You may begin your conference.

Thank you. Good afternoon everyone. We appreciate you joining BJ's Wholesale Club's fourth quarter and fiscal 2018 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 prospectus filed with the SEC on February 21, 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 and supplemental documents posted on the investors section of our website 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. We’re pleased with our fourth quarter and full year 2018 performance. We continue to make progress across our business as we transformed BJ's Wholesale Club. For the fourth quarter and for the full year we exceeded our expectations for sales, earnings and for cash flows. In the fourth quarter we saw merchandise comp sales of 2.9%, our sixth straight quarter of positive merchandise comps and an acceleration of our two-year stake. Notably during the quarter, we grew comp sales in every business and in every geography in our company. For the quarter, adjusted EBITDA is $165 million which is up 16% compared to 13 weeks last year. We continue to drive strong cash flows in the quarter supporting the reduction of our debt well ahead of our previously communicated debt reduction schedule. Our result show the investments we started to make as we begin our transformation in 2016 and 2017 are continuing to pay off. As an example, last year marked the first time that BJs members were able to take advantage of our full omnichannel offering for their holiday shopping. Members could click coupons on our app, use our Buy Online Pick Up in-Club offering and take advantage of same-day delivery for fresh food. While we’re pleased with our progress, we’re much more encouraged by the opportunities ahead of us as our transformation is still in the very early stages. Our investments are focused on building the capabilities necessary to deliver long-term growth across our strategic priorities which are acquiring and retaining members, delivering value to give them shopping, make it more convenient to shop at BJ's Wholesale Club and expanding our strategic footprint. First, I’ll give you an update on acquiring and retaining members. We ended the year with all-time highs for paid members and record highs for renewal rates and membership fee income. We also achieved record enrollment in easy renewal and in our highest year memberships, more than half of our members are enrolled in easy renewal and over 23% are enrolled in our premium memberships. We continue to acquire members through digital channels. This is key to attracting younger families who are just discovering the club channel. For the full year we more than double the number of members acquired digitally. Our second strategic priority is to deliver value to get them shopping. I mentioned before that our current performance is the result of investments we began making several years ago. Nowhere is this more true than in our General Merchandise business where we started our assortment transformation. GM comp sales were up 5% in the quarter, a continuation of our strong third quarter performance. TVs are a good example of how our transformation is delivering results. Last year we invested to improve the high-definition TV signals in all of our clubs allowing us to better showcase our improved assortment, as a result, sales in the quarter that were well above our expectations. We also saw a strong growth in apparel as we reallocated space to our highest sales producing categories like outerwear, kids apparel and women's activewear. We see room for continued growth in apparel as we continue to build our assortment capabilities and deliver an even stronger value over time. More recently, we started to revamp our kitchen assortment. For the quarter we saw strong growth driven by execution on Black Friday and better assortment. We still have plenty of room to go in this category, but we’re encouraged by the progress. A key foundation of our transformation is to deliver unbeatable prices and improved execution in our grocery and perishable business. In the quarter, we delivered growth across these categories driven by strong marketing programs and a sharp focus on value during the holiday season. During the holidays, our fresh food quality and low prices make us the destination for smart saving families. We saw perishable comp sales of 2% in Q4 with growth in produce, meat and food. We also saw a solid growth in our entertaining business which includes deli and bakery platters. This performance was also driven by investments and improved in-club execution. Our own brands are key to delivering outstanding value and quality to our members. These products are also an important to the success of our ongoing category profit improvement initiatives. We ended the quarter with 20% own brands penetration and we see significant opportunities there as we’ve developed more robust processes to build the strong pipeline of high quality products. As a result of our efforts we’ve reduced our cost while maintaining strong member satisfaction. We’ve also adopted a sourcing approach that let’s us get products to shelf faster while maintaining a consistent look and feel for our members. Our recent Wellsley Farms wine launched with items priced under $10 shows how we can source multiple products from different suppliers and countries and deliver them to our members with consistent branding and market-leading value. In late Q4 we started the transformation of our services business by bringing our optical business in-house from our third-party supplier. This change will dramatically improve the value, service and selection we offer our members and we see optical as a growth driver in the future. We are actively looking at our entire services portfolio with the goal of changing and adding services that will deliver value to our members and drive growth for our company over time. Our next strategic priority is making it more convenient to shop at BJ’s. We made significant progress across our digital properties in 2018. Over the past year we have launched and improved our Buy Online, Pick Up In-Club, Digital Coupons and of course Same-Day Delivery. Members love these added digital features that make [Indiscernible] clubs and online. We had more than 100 million visits to our digital properties in the year. In Q4 we surpassed 1.5 million app downloads reaching this milestone in just over one year. We also achieved a 4.7 star rating in the Apple app store. Over the year we had well over 100 million Digital Coupons downloaded by our members. Our BOPIC and Same-Day Delivery programs while still quite small continued to grow rapidly. BOPIC was particularly popular during the holiday season as members were able to make purchases and pick them up within a couple of hours. We also launched ship-from-club capabilities in Q4 which gives additional flexibility as our omnichannel business continues to grow. Finally, we plan to expand our strategic footprint. We are set to open a new club in Clearwater Florida in just a few weeks and were very pleased with our membership acquisition works so far. Clearwater is an infill for us. Club like this play an important role in attracting both new and laps members. We’ve improved our ability to target previous members who respond well as we highlight the transformed BJ’s Wholesale Club. We’re also making progress in Eastern Michigan and are on track to open two clubs there later this year. We see this region is a great fit for us given that our target is the smart saving family and we continue to actively look for additional growth opportunities in this region. Our gas stations are key to delivering value to members. We open two gas stations in the fourth quarter and by the end of the new fiscal year we expect to have gas stations in about two-thirds of our clubs. Overall, our real estate pipeline is stronger than it has been in years and we’re on track to open four to five clubs in eight to 10 gas stations in fiscal year 2019. Looking ahead to fiscal year 2019, we expect another strong year. Bob will have more details on our outlook. This year we will continue to invest in advanced analytics to improve member acquisition and we expect to launch point-of-sale technology that will drive co-brand credit card sign-ups. We also – we will also invest in our personalization, assortment and pricing capability that will continue to drive our growth and we’ll continue to improve the convenient services we launched over the past year. With that, I’ll turn the call over to Bob who will review our results and outlook for the year in more detail. Bob?

Thanks Chris. Good morning everyone. As Chris noted our strong four quarter performance demonstrates successful execution against our strategic priorities and continued momentum in our business. We remain focused on continuing the company’s transformation and on driving gains in sales, membership, profitability and cash flows. Let's turn to our results for the quarter. Net sales increased by 2.8% to $3.3 billion when compared to the appropriate 13-week period last year. Recall that last year's fourth quarter had an additional week which represented approximately $240 million in sales. Comp sales increased by 2.8% including one-tenth of a percent impact from deflation in the gasoline business. Merchandise comp sales which exclude gasoline sales increased by 2.9% representing a two-year stack comp of more than 4%. These great results are driven primarily by increases in traffic. Our results were supported by strong holiday performance and our momentum continued into January. Although we benefited from the early release of government assistance in January, that benefit was offset earlier in the quarter as we lap last year's government assistance in the wake of hurricane Irma. As an every quarter there were other additional small puts and takes. However when combined they had no material impact on our merchandise comp for the quarter. Therefore, we believe that the 2.9% merchandise comp reflected the underlying trend of the business within the fourth quarter. We improve merchandize comps across all four divisions. Our General Merchandize division led our merchandize comp sales gains for the 5% comp during the quarter. Some of the key drivers of our success for our TV, apparel and houseware categories; the two-year stack comp for our GM business was 3% as we lap changes in housewares and small appliances. We reconfigured our assortment in these two categories to make them more relevant to our members and both showed improved performance in those quarter. We look for continued improvement in the future. For the remaining three divisions; perishables, edible grocery and non-edible grocery, the two-year stack comps outpaced fourth quarter comps, underscoring the growing momentum in our business. Our perishable comp sales were 2% for the quarter, improving sequentially from the third quarter and representing a stack comp of more than 4%. Key drivers of growth include strong performances in bakery, fresh meat and produce categories. We saw a small impact from deflation is this division and unit growth was up broadly in these categories. We remain focused on executing and improving this business to drive unmatched quality and pricing. Comp sales of our edible grocery division increased by 3% during the quarter driven by growth in salty snacks, water and specialty beverages and represented a 4% stack comp. We were encouraged by the continued improvement in this division which is supported by strong holiday and Super Bowl marketing and merchandising activities. Comp sales of our non-edible grocery division increased by 2% during the quarter driven primarily by improved assortment particularly in our HBA categories and represented a 4% stack comp. Membership fee income grew by 11% during the fourth quarter, approximately two-thirds of the growth was driven by our membership fee increase and one-third by member growth. The continued growth in our membership fee income underscores the fact that our value proposition continues to be relevant to consumers. As Chris mentioned, we achieved an all-time high for paid members of $5.5 million and record renewal rate of 87%. We projected to lose a little bit of renewal rate due to the fee increase that we implemented at the beginning of the year. Through strong execution we’ve been able to offset that impact and grow to our fourth consecutive all-time high in this important measure of the health of our business. These results were driven by relentlessly communicating our value to members, successfully moving more members into our higher membership tiers which now represent more than 23% of our membership base, and executing on our easy renewal program. As of the end of the quarter, more than half of our members were enrolled in that program. Importantly, we also remain focused on improving in-club execution particularly at our membership desks. Gross margin rate increased by approximately 70 basis points over last year's fourth quarter, the cost of gasoline decreased during the quarter driving gross margin rate in that business. Excluding gas our merchandise gross margin rate increased by approximately 10 basis points over last year, driven by benefits from our procurement initiatives partially offset by sales mix. The fourth quarter included increased sales and categories with structurally lower margin like televisions. SG&A expenses were $517 million in the fourth quarter compared to $528 million last year. Excluding severance costs associated with our 2017 voluntary retirement program, management fees paid to our sponsors and expenses associated with last year's 53rd week, SG&A expenses increased by approximately $20 million. This increase reflects investments and capabilities and talent to continue to drive our results. Operating income as a percentage of total revenue was 3.2%, reflecting a year-over-year increase of 30 basis points after adjusting the prior year period for $11 million in severance costs and management fees mentioned earlier. Interest expense decreased to $27 million from $47 million with last year's fourth quarter primarily driven by our dramatic delevering and the benefit of repricing our first lien term loan and ABL facilities in the third quarter. Please note that last year's fourth quarter included $15 million of interest expense from our second interim loan prior to its extinguishment. We recorded income tax expense of $19 million during the quarter compared to a tax benefit of $22 million in the prior year. The benefit in the prior year period was primarily due to the remeasurement of net deferred tax liabilities resulting from the recent tax reform legislation. The variance between our normalized tax rate at 27% and the reported rate of approximately 23% for this quarter was driven primarily by $2.7 million of windfall tax benefits from stock options exercised. Adjusted net income was $62 million in the fourth quarter or $0.44 per share compared to $51 million or $0.36 per share in the prior year period. Excluding the additional week in the prior period adjusted net income grew by 42% reflecting our strong execution and interest expense savings. Our press release includes a table that reconciles GAAP net income to adjusted net income including on a per share basis. We are very proud of our continued significant increase in profitability over the past 12 consecutive quarters. Our adjusted EBITDA was a record $165 million in the fourth quarter reflecting 16% growth when compared to a 13-week prior year period. The growth in our adjusted EBITDA was driven by our continued execution in our clubs and enhanced profitability in our gasoline business. Moving now to the balance sheet, our AP to inventory ratio which measures how much of our inventory is sold before we pay for it, improved to 78% versus 74% in the prior year. We remained disciplined in our inventory environments and well-positioned for fiscal 2019. Let’s turn briefly to our results for the year which were ahead of our most recent guidance across key metrics. Merchandise comps exceeded our expectations at 2.2% for the full year, adjusted EBITDA at $578 million and adjusted net income at $186 million or $1.33 per share were above the high end of our range. We also had very strong free cash flow which we define as operating cash flow less CapEx of $281 million versus $73 million last year. Recall that the prior year included a one-time cash outflow of approximately $78 million related to our February 2017 recapitalization. Therefore, more appropriate comparative prior year amount is $151 million. The strength in this year's cash flow is driven by our improved profitability and strong working capital management. We view that great free cash flow performance to accelerate our ability to pay down debt. And as a result our funded net debt to adjusted EBITDA ratio at the end of the year was 3.1 times. We expect it to be under three times by the middle of fiscal 2019, approximately six months earlier than our original plans. Once we reach that point we’ll begin to think about alternative uses for excess cash flows. Let’s now turn to our outlook for fiscal 2019. We’ve laid out our guidance on our earnings release and I’ll point you to the table for details. Our outlook reflects our confidence in the underlying strength of our business and the benefits from continued investments in our strategic priorities. We expect net sales to be between $12.9 billion and $13.2 billion with merchandise comp sales excluding gasoline of 1.5% to 2.5%. Importantly, the midpoint of our merchandise comp guidance represents continued acceleration of our two-year stack to over 4%. Last year’s two-year stack was 1.3%. From a membership standpoint, we expect to continue to attract new members and maintain our high renewal rate. Keep in mind that membership fee income for fiscal 2019 especially towards the second half of the year will not have a significant benefit from the fee increase in January 2018. Adjusted net income is expected to be $200 million to $212 million or $1.42 to a $1.50 per share for the fiscal year. We expect our fully diluted share count to be $141 million -- and 141 million shares for the year. Earlier adjusted EBITDA is expected to be in the range of $590 million to $600 million implying another record year, excluding the impact of unusual income from gasoline in 2018. We expect our adjusted EBITDA growth in 2019 to be in line with our long-term guidance. Implicit in this profitability guidance are continuing investments and marketing and membership priorities. We expect these investments to be funded by continued progress in our CPI initiative and increased private-label penetration. As we’ve shared with you in the past, we’ve taken a more comprehensive approach to drive savings and improve our assortment. The baby assortment change that we previously talked about is a good example. These important efforts will continue to allow us to invest in our growth. The new accounting standards for leases will be adopted in the coming year. Very important to understand that while the accounting for leases will change there is no economic effect from this change as the cash rent stream remains the same. While we are still finalizing the details of our adoption, our guidance for the full year reflects our estimates for the impact of lease accounting standard. We expect to record assets and liabilities as a result of this change of approximately $2 billion. Importantly, we do not expect any material impact to our earnings. Our full year interest expense guidance of $105 million to $110 million reflects our recent debt repricing and efforts to fix the rate on our portion of our debt. As a reminder early in the fourth quarter we entered into a series of interest-rate swaps that fix the LIBOR component of $1.2 billion or about two-thirds of our debt at a rate of 3%. We believe we are well-positioned to manage future interest-rate risk. Our capital spending is expected to meaningfully increase as we accelerate the opening of new clubs and gas stations. As Chris mentioned earlier, we [Indiscernible] five new clubs and eight to 10 gasoline stations during the year. We’ve elected to purchase land for certain clubs which drive higher initial capital costs compared to a typical leased club. It’s important to note that we will likely consider entering into sale-leaseback transactions on any new owned clubs, thereby enabling us to increase expansion while continuing to delever. We expect to invest approximately $200 million during 2019 prior to consideration of any sale-leaseback proceeds. In closing, I’m proud of our results for fiscal 2018. We’ve seen encouraging membership trends and substantial increases in sales, profitability and cash flows enabling us to continue to invest for future growth. We look forward to delivering on our goals for fiscal 2019. And now, I'll turn the call back over to the operator to begin the Q&A session. Sharon?

[Operator Instructions] Your first question comes from Robert Ohmes with Bank of America. Your line is open.

Hi, guys. Can you hear me okay?

Yes. We can.

Great. Hey, great quarter guys. Actually I’m just – I’m going to ask – I’m going to start just on asking you about gas. Two questions, on the gas stations, can you tell what kind of leverage [ph] you get when you add a gas station to an existing club? And what it does to the same-store sales and the expectation on the outlook for the comp curve? And the other question related to gas would just be -- can you can you walk us through the gas contribution to EBITDA for this fiscal year? And then, in guidance what you're thinking gas is going to be doing for you guys for the fiscal year you're in now?

Yes. Thanks for question, Rob, good to talk to you. So as we add gas stations the most important thing it does for us is in fact our renewal rate within in that club. Gas is an incredible way to illustrate value to our members. It’s probably the most known commodity out there in terms of price because there’s a sign on every street corner out there. And we will try and put a gas station wherever we can whether on all of our existing sites or very close nearby because we know it does drive improvement in renewal rates. So, we don't think about it is directly driving comp, meaning, it’s a light switch when you open a gas station that sales in the box go up. We do see that happen in very high priced environment, so think above $3 you will definitely see an impacts of opening a gas station in these -- the pricing environment we have today you would see a more muted impact to comps, but certainly over the lifetime of a member and over the lifetime of the club, it is accretive to do so. As you think about the gas contribution to EBITDA this year, certainly Q4 was a strong gas margin quarter owing to the slide in cost and as you know as gas costs go down the profitability of the business goes up and the inverse is true on the on the other side of the curve, so we certainly saw that during. When we think about as a contribution of that versus the rest of our business what’s the back out? We certainly still think some of our beat was driven by the core business and some of it certainly by the gas business as well. As we think about next year, Rob we’re thinking gas goes back to normal if you will. We always try and project a normal year without a considerable disruption, and so the gasoline income for the years is embedded in the guidance that we put forward. But it would be more of a normalized profile for gas business and [technical difficulty]

It’s about just to clarify. So the guidance you gave us would assume gas dollar contribution EBITDA contribution to potentially be down from what you reported this year?

That’s correct. Yes.

Great. That's really helpful. Thanks so many guys.

Robbie, I want to add one short point is, as we think about the gas markets obviously the fourth quarter of this year was a little bit unusual, but one of things we feel really good about is the fact that we continue to grow share in gasoline, which is a really fundamental part of our value proposition for our members.

Thanks so much. Congrats on a great quarter.

Thanks Robbie.

Next question comes from Edward Kelly with Wells Fargo. Your line is open.

Yes. Hi, guys. Good morning. Couple of questions for you. First on the comps; could you provide a bit more color around the stack benefit and I guess sort of like, what you’re talking about with the offset of Irma last year. And then do we assume that means that this February comps so far is kind of generally in line with guidance? Just some help there would be a good?

Sure. Hi, Ed, this is Chris. Thanks for your question. One of things we spoke to you about last summer was the fact that the Irma – post-Irma, the government issued food for Florida credits to all residents of Florida that helped our comps in the year ago period. So, as we started – that’s one of the things we're a little bit cautious about as we started the quarter. And as you look in on the total quarter, Ed, SNAP overall was actually a slight drag on our performance. So, Bob made some comments about 290 and about what we delivered on a run rate for the fourth quarter overall. So, weakness in the beginning part strengthen the back a little bit of a negative overall, and as we think about the obvious positive in the month of January it'll certainly impact the first quarter, but we think we’ll be in line with our annual guidance, so we feel okay about that.

And then just remind us, I think you had some unfavorable weather in Q1 last year. Is that right?

This is when we talk about all the time. And yes, the first quarter is always one having been in businesses -- in this business and in businesses like this for over 30 years. The first quarter is always a little bit unusual because weather variability can be high, tax benefits can change year to year, and the time of Easter also plays a role. But the weather last year was a little bit unfavorable and really created a soft start to our GM performance in the quarter, because it was cold and rainy, other than that, that’s what I’ll give you some texture, but texture we’ll have for you on the first quarter.

Okay. And just one last one for you. On the gross margin, in the merch margin progress stalled a bit this quarter and was lighter I think than probably, maybe what – I think probably what you expect it for the quarter and lighter than what the market is looking for, but there’s some mix factor. So, can you parse out what you think the next impact was? How was underlying performance? And then how do we think about the merch margin in 2019?

Yes. Ed, I’ll take that one. Certainly our merch margin performance was slightly below the implied guidance that we gave for the quarter. We got it to about 20 basis points and we were approximately 10 basis points. Just to put that in sort of dollar context. That’s about $3 million, so certainly not the biggest amount in the world. We guided lower than the run rate in the front part of the year specifically because we know the timing of the waves of CPI benefits coming in. So Q3 I think was 60 basis points if I remember correctly. We were guiding the 20 because we knew that there were smaller waves coming in for. Importantly, in first and foremost we expect the CPI benefits to continue and it would be somewhat comparable to our success in the past year. We have a number of ways coming in that have already been identified and certainly we’re still working on it. And we’ve talked a little bit about over time, the changing complexion of the CPI program where it’s gone from more hard-nosed negotiations to a more comprehensive assortment based review process. But overall I think the key message there is that process is still healthy and vibrant and we expected to yield tremendous benefits as we go forward. Within the fourth quarter, you're a couple of offsets and Dr. Chris talked in his remarks and I talked a little bit about the same thing about the tremendous amount of business we did in our TV segment. That category has structurally lower margin rates and they are even lower in the fourth quarter than they are for the full year given the promotional nature of that business. So, certainly easy to understand as we saw more of those types of categories, it's a little bit of headwind from mix perspective. We are very very happy to take that business all day long, much like gasoline, it’s an important value proposition point to our members where they save a couple hundred dollars on the television and really tell their friends about. It’s an important validation of the value they get for paying $55 or $110 a year to be a member. The other thing I would point you towards is tariffs. So we had a tiny bit of pressure within the quarter from that. Coincidently, it was right around $2 million or $3 million over the gap between our guidance and what we saw. We don’t expect that to be a big headwind going forward, given we don't source a lot from China. We start to revamp our supply chain a little bit there. Hopefully, we’ll actually get a favorable trade deal, but that will happen. But all of all things together really drove the slight underperformance in margin rate. We don’t think that’s a continuing trend. We do believe our margin rates will continue to go up and that will service yield for growth.

Thanks, guys.

The next question comes from Chuck Grom with Gordon Haskett. Your line is open.

Good morning, guys. Nice quarter. Just a follow-up on Ed’s question, just looking ahead to 2019 can you help us think about what you're expecting for both gross margins and SG&A within that adjusted EBITDA guidance? And then within gross any color on the core would be helpful?

Hi, Chuck. We’re not specifically guiding either gross margin rate or SG&A, but I think what I would tell you is we would expect margins to continue to grow. We would expect them to grow slightly less than what we saw in this particular fiscal year for the full year and we’ll continue to use some of those gains in margin through investment in the business. We’ll be discipline in those investments, we’ll be balanced. We are [Indiscernible] long term. So certainly we spend a lot of time making sure that we get our money's worth. And as you think about the things we will invest in -- we talked about many of them in the previous call. The biggest ones are around membership and personalization. So how do we acquire our new members? How do we get members to renew more and more? Those are the two most important things that we think about all the time. We’re making great strides from personalization perspective. So think back to 18 months ago or so. Everybody in the – every member in the company got the same promotions whether they were rich or poor or lived in the north or the south or came to see us a lot or a little. Now we're actively personalizing each members promotion based on their actual purchases and more often than what they aren’t buying as much as what they are buying. The investments there is really building the data capability, the personnel associated with that, that has the potential to be very very helpful to our business. We’re spending a lot time on that. And then new for this year actually is, we’re testing investments in our operations capability. So you’ve heard us talk about a lot about trying to improve the operations within our clubs specific to our membership test and more recent past within our perishables business our operations leadership team is really striving to get our club operations all over the building to a world-class level and some of that requires investment. We do expect it to ourselves and we will invest in that as well this year. So we do expect margin growth slightly less than what we saw this particular year and we’ll take a pile of that and invest it in SG&A and drop the rest of the bottomline.

Okay, great. That makes a lot of the sense. And then just my follow-up would on the comp guidance, the 2% at the midpoint. Any – can you hold the hands little on the curvature throughout the year? Anything by category you want to shed some light on? And I guess, embedded in that within the perishable category any expectations for inflation or deflation? How you’re thinking about that? And then finally, just a lot of color over the past couple days about the cadence of February's comp and curious if you guys will start off the year? Thanks, Bob.

Chuck over – let me a make couple of comments – let me make a couple of comments on your previous questions as well. Overall, we’re going to stick with our guidance for the full year. I made a comment in response to Ed’s question about the first quarter certainly seeing an impact from the SNAP’s shift and it’s a straight up shift as others have probably told you. And – but we feel like we’re going to be in the range. Overall, the big things as we go forward our continued acceleration in our progress that we've taught you about and those sources of investments we believe will help us get what was a 1.3 stack this year up to a four stack next year, but we feel quite good about that. One thing that strategically, I think is really important to consider and it’s certainly was the case in the fourth quarter and into next year. We will continue to spend into the beats as we see them. So It was obvious very early in the fourth quarter that we had a really strong cadence of progress going and whether it is our continued investments in our teammates in the field on our operations organization or continued investments in marketing to continue to drive sales, we’ll continue to spend at the beats as we see them. So, overall feel good about the full year guidance. I would think about first quarter, so as within the guidance we’re probably a little bit lower given the SNAP shift and we’ll move forward from there.

Thanks. Good luck.

Thanks, Chuck.

Next question comes from Simeon Siegel with Nomura/Instinet. Your line is open.

Good morning, guys. [Indiscernible] on for Simeon. Thanks for taking questions. Could you guys give us an update on what you guys saw with respect to freight during the quarter? I think you call that was a pressure point last quarter and may be expectations for the upcoming year?

Steve, thank you. We did not see significant pressure from freight in the fourth quarter notably expect significant pressure. There’s always going to be a little bit here and there, but as we go into next year. We manage the cost across our entire fleet which we have that's relatively speaking a captive one with a very important supplier to us. Our ability to work with them is extremely high. One of things I submit to you for consideration is there’s somebody has been in the logistics business for a long time, cold freight is really clean. The fact that we are shipping full pellets and full trucks all the time is very good freight for our suppliers and our ability to run our logistics operation as effectively as we do makes that freight even better. So while the world is challenging for everybody we think we have that one manage pretty well.

And if I could squeeze a quick follow-up with new club openings picking up this year, how should we think about the quarterly cadence, I guess moving throughout the year?

So you heard four to five new clubs. Clearwater will open in April and the rest really is in Q4, so Michigan will be sort of the November timeframe which is two buildings and then the fourth and potentially fifth close will be probably December or January.

All right. Great. Thanks guys. Appreciate it.

Thank you.

Next question comes from Christopher Horvers with JP Morgan. Your line is open.

Thanks. Good morning, guys. So a question -- follow-up question about a gas, your earnings is up – about 8% at the midpoint. Can you talk about how much a normalized gas profit creates from an earnings growth perspective? And are there any quarters where you would expect the headwind to be larger, obviously the fourth quarter? And then related to that given gas prices are, I think still down year over year. Do you expect to see a benefit in the first quarter?

I’ll take them in reverse order. I think the first quarter is going to be pretty flat, right. I don't see a big dislocation coming. You kind of never know what the market is going to do. But the way our business is running today it's more or less normal. The cadence throughout the year certainly Q4 will be difficult to lap from a gas income perspective. We saw a little bit of benefit in the last month of the third quarter and then the vast majority of the benefit in the fourth quarter. The rest of the year other than the fourth quarter is more or less pretty balanced. The way that we've been thinking about gas’s contribution to this fiscal year beat is more what I said in my prepared remarks around what I consider the EBITDA growth rate. So we've told you in the past we would consider 5% to 7% EBITDA growth rate to be appropriate for us. Certainly, if you built 578 to the midpoint of our guidance 595 it will be somewhat less than that. We think the sort of “unusual” gasoline in coming Q4 makes up the difference that growth rate and the long term guidance. That's kind of how we've been thinking about it. So, certainly a great year from a gas business perspective, the big dislocation in Q4, but also a lot of progress throughout the year by our gasoline team on how they run the business, how they look at, where our members come from to buy gas. How we can price more effectively to not only drive gallons as Chris talked about. We're taking share in gas but also drive improved profitability from that perspective as well which we then turn around and invest back in the business. So, overall gas had a great year. We expect a more normalized year next year and the toughest one to lap.

Got it. And then in terms of the membership acquisition and retention, can you talk about what you've seen in terms of the underlying ex MFI increase growth rate and membership fee income over the past year or so you started really prospecting harder in the back half of 2017. Are you seeing progress? Are you seeing that accelerate? And then underneath the guide in 2019 ex MFI how are you – how you planning out the growth and income on an organic basis?

Yes. Certainly that the team here has tried a lot of different things as we try and raise the concept of investing into the lifetime value of an average member; we still believe that there's is a return, but some of the things that we did in the past didn't work. We're trying a whole lot of things as we try and renovate that area of our business and some things work nicely and others didn’t. And so, as we go forward obviously that the plan would be do more of the things that did and do less of the things that didn't and place the things that didn't with a bunch of new ideas. And so, we saw low single digit member growth during the year getting to that all time high of 5.5 million paid members, so we’re excited to get over that hurdle. We would consider that to be a win. The thing I would ask you to consider there is we're lapping -- excuse me, lapping the Sam's members that we got it, they closed their buildings. So the hills are little higher to get to that same level of new member growth in this New Year. But we do believe we are well-positioned to continue to grow members. We do believe we're well-positioned to continue to grow our renewal rate which is just as good or perhaps better than an average new member. And we have a lot of ideas to go do it. But I think that, Chris.

I think that’s a good characterization where we are.

Excellent. Thanks guys.

Thanks Chris.

Your next question comes from Peter Benedict with Baird. Your line is open.

Hey guys. Question on the covering and credit card members; can you remind us kind of how those folks behave maybe relative to your typical member and what -- can you share any targets in terms of where you think you can get that either this year or over the next couple of years?

Hey Peter. Thanks for your question. The big deal for us and why we speak about those premium memberships overall and specifically credit card memberships are the much higher renewal rate. Think about it as 95 plus percent. What our average are 87, so everything -- every time we can push more members in the credit card. And as you think about this, this is one thing as a company. You don't hear us say we're proud of a lot of things. But this company’s credit card offer got launched about four years ago and we will continue to innovate into it. And the team has made amazing progress since relaunch. But we have a lot of room to grow. We have competitors with a higher percentage of their members and their premium peers and that's what we're going for. The innovation that we have in line for this year is about activating point of sale systems capabilities that we've been working on for well over a year that essentially pre-qualified the entire membership base. So people will be able upgrade to a credit card member at the point of sale. And it's an important point that we have -- we continue to grow. And acquisition in this part of the space since 2014 is that actually accelerated. And I mentioned 2014 because that's when we launch the credit card program in real terms.

Now that's helpful Chris. Thanks. Just one follow-up. Just on the ancillary business opportunity, you alluded to it in your remarks you kind of mentioned optical as an area where you're pleased. Can you give us any more color in terms of where you see the biggest opportunity within ancillary and maybe a timeline for when we should start to see some paybacks on that?

Sure. Good question. One of the things I've tried to be consistent on since we started speaking to you over the last year is the fact that the foundation of our turnaround is grounded in creating a better experience for our members. And we've made a lot of progress in that regard across a variety of dimensions. And I must tell you that the one thing that I have had to be patient on is the services portfolio which I believe is an opportunity for substantial improvement. Over the last year we put the right talent in place to lead that work. Lee Delaney and his team have done a really terrific job of getting the right talent in place. And I would submit to you that the optical transition is the beginning of a series of steps we'll take to improve that business. But there's opportunities in every part of it from optical to travel to cell phones to other services that we're not in a position to activate yet, but things were very aggressively working on behind the scenes.

Okay, great. Thanks so much.

Thanks Peter.

Thanks Peter.

Next question comes from Chuck Cerankosky with Northcoast Research. Your line is open. The next question comes from Laura Champine with Loop Capital. Your line is open.

Thanks. Question about The warehouse club growth that you've got planned, you've already announced opening in Michigan. Can you talk more generally about your views on your footprint expansion and what you expect to do outside of the northeast as opposed to filling in existing markets?

Sure. Thanks for your question Laura. I made comments in my prepared remarks about the company's real estate portfolio is in better shape today than it was has been in quite a while. Our plans this year are a good reflection of how we think about expansion overall. We're in a couple of weeks will open in Clearwater and we're thrilled with our progress there. New member acquisition work is ahead of expectations and in that case the unlock there, Laura, has been about tapping into past members and our ability to do that more effectively today than we were able to do it a few years ago has helped us think differently about infill clubs. In terms of new markets, we have a couple going into Michigan in the fourth quarter. We're continuing to look at other opportunities in that market and in other markets like it. But we'll think about the new markets probably one new market at a time per year versus going into two or three new markets all in the same year. In that case the challenges creating a brand position that makes sense to the members in that market. We've -- the capability Lee and Brian Poulliot have built on their teams to do consumer work about how we can be different when we enter a market has been very very compelling. And it not only helps our new market entry frankly it helps us think differently about our core proposition in our core market. So as we look at this going forward, we'll have a balance of both. We're excited about Michigan this year and we'll continue to look at both infill and new market entries during the course of the coming year.

Thank you.

Thank you.

Thanks Laura.

Next question comes from Karen Short with Barclays. Your line is open. Karen, your line is open. Next question comes from Mike Baker with Deutsche Bank. Your line is open.

Hi thanks. I just want to follow-up on comment made earlier about seeing a benefit to membership growth from Sam's Clubs. Any way you can quantify that? And then I guess related to that do you think you saw a comp benefit at all from those closures? And if so can you help us frame that? Thanks.

Yes, Mike. We're going to be consistent with what we've done. We've been asked that question in the past that we're not going to get into the specifics, but we certainly saw a member benefit and a comp benefit in the quarter in the year. Pardon me. And the important note that I think that needs to be discussed is the fact that those members will continue to grow and develop with us over time. And that takes a little while to mature them and teach them about our business versus our competitor who is closed and we've -- the important point is we feel great about our ability to continue to retain and develop those members and that contributes to the accelerating stack performance you see in our company.

Okay. Understood. Two more quick ones on the comps. One typically when Easter is late as it is this year does that -- I presume that helps your comps and is that embedded in your guidance. And then the next one, little bit for fun but also some seriousness. Red Sox win the World Series right at the end of the third quarter. Did that help to being in the fourth quarter at all? And then similarly the Patriots winning right in the beginning of the first quarter; any help there?

I am not letting Bob answer the second question. So I'm going to answer that one. Look the reality is that the Patriots win so often that it's in the base and it's hard for us as a New Yorker to actually admit that out, but it’s true. But last year we actually had two in market teams in the Super Bowl which was a big deal. This year it’s only one. And so the reality is that candidly the way baseball has been scheduled from a TV perspective it's less of a family gathering than it ever used to be because the darn games don't until 11:00 at night. And they're rare not rarely on the weekends but they're not as weekend oriented as football is so. So as you think about guiding for the full year for next year the Easter flip timing changes between month, but it really doesn't have any change to the full year and that's what we're guiding to. So I think the big deal this year as last year starts in the spring was cold and wet. So you had this delay in the start of all of the GM categories that are a big part. They get triggered on the first couple of warm weekends of the spring, Mike, whether it's garden lawn furniture. So, we feel like we've characterized well the think -- the way to think about the first quarter in the context of Easter timing.

Understood. I appreciate the color. Thank you.

Thank you.

Next question comes from Karen Short with Barclays. Your line is open.

Hi guys. This is Sean on for Karen. Sorry about that before. I want to ask about your thoughts on the guidance and really the cadence of guidance for EBITDA growth this year you mentioned that obviously there's going to be an impact from SNAP in the first quarter and you just mentioned some weather impacts, I mean obviously, two, thinking about fourth quarters obviously difficult dual comparison, but just how should we be thinking about the cadence on EBITDA growth this year?

Hi, Sean. Certainly from both sales and EBITDA perspective I think the quarters are pretty balanced. The one call out on the sell side is SNAP EBT benefits which we've talked about. And then the one call out on EBITDA is the lapping the gas benefit in Q4 of the year. So, first three quarters I think are relatively even and subject to some seasonality, but growth relatively even in Q4 as the gas buried [ph]. So you kind of you never know what the gas business is going to do. So as I said earlier we tend to model a normal year-over-year and not every year is a normal year but outside of that there really aren't any significant bumps that we should be thinking about.

Okay. That's helpful. And just any follow on memberships. Can you give us a sense of how many were given away in October and the retention rate for those memberships that were given away? I think about four months in or so. And I believe, I think three months was free?

So, Sean, we don't give away memberships. Certainly, we employ a variety of tactics to get new members. One of which is a three month trial membership that usually results in a paid membership at the end of it, hopefully. You may be referencing the open house that we ran in third quarter and the beginning part of the fourth quarter. That was with a few day event like two week event. Hopefully we converted those members as well. The thing that I would point you to with respect to membership fee income is our fourth consecutive year of record renewal rates. All the way up to 87% record MFI dollars as we as we sit here today, record premium here is a record number of paid members. You get the point. The membership is going in the right direction and not as an interval component o the economic model in the club business. And we see it providing strength as we go forward.

All right. Thank you.

And your last question comes from Simeon Gutman with Morgan Stanley. Your line is open.

Thanks. Good morning. My first question just thinking about the growth of the complexion of growth. You mentioned that you're going to take some of the CPI and reinvest it. Is that a change? And if so why is that that a change? And let the SGA leverage drive more of the margin. And do you think it's appropriately captured to the extent you get a quick payback on those reinvestment. Do you think it's captured in the one and a half to two and a half comp guide?

Simeon, overall one of the things -- first of all thank you for your question. So there are a couple of kind of macro principles of that we've tried to communicate very effectively, very consistently pardon me across the time we've been speaking to you. CPI has been a capability that is foundational to our ability to create fuel for growth and over time our approach last in this coming year is no change versus where we've talked about. You may recall that we have said we save plus or minus $300 million over the course of the first couple of years and we invested about. You'll probably recall some of those comments very similar approach as we approach this year. The other thing is we're going to continue to build the strength of the foundational durability of our company by investing into beats which we certainly did in the fourth and we’ll continue that into next year. So, Bob, do you have any further texture on that subject?

No. I think that covers it.

Okay. My quick follow-up, just looking back again those comments about similar level of margin, if we look at the incremental margin that’s implied, we tried to take the midpoint of I guess a EBIT number, it looks like it's a little bit better when making adjustments than 2018 and 2018, the comp was roughly the same like to – I think if you take the midpoint its two. So it’s actually looks a little better. I don’t know if there’s more noise in it if it’s a gasoline compare or if, I guess Bob you said it was intended to look similar, but it’s coming out a little bit better. Is that fair?

I think you’d have run me through the math that you’re doing to really answer the question. But I think our stance really hasn’t change. Chris, talked about taking a pile of CPI and by the way we gain some and investing those, we will do that exact thing next year. I talked a little bit earlier about investing in something from a short-term perspective and something from a long-term perspective and we will continue to do that. And so certainly we would expect the P&L for next year or next to look little bit like that right. Continued margin growth, continued pressure from an SG&A perspective, but that's kind of what we doing here, right. We’re turning a company around. We’ve had spectacular success over the last couple of years in doing so. We’ve got a tremendous amount of opportunity going forward. That opportunity takes some spending to go get and we’ll continue to do that in a balance way, so that we can do the right things from our members and for our shareholders.

Great. Thanks.

And at this time, I’ll turn the call over to the presenters.

Thank you all very much and we’ll look forward to seeing you on the road. Have a great day.

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