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BJ’s Wholesale Club Holdings, Inc. 2023 Annual Meeting of Shareholders (the “Annual Meeting”) will be held on Thursday, June 15, 2023, at 8:00 a.m., Eastern Time. The Annual Meeting will be held solely by means of remote communication in virtual meeting format. You will be able to attend and participate in the Annual Meeting online by visiting www.virtualshareholdermeeting.com/BJ2023, where you will be able to listen to the Annual Meeting live, submit questions and vote.

All shareholders of record of our common stock at the close of business on April 24, 2023, the record date, are entitled to notice of and to vote at the Annual Meeting, or any continuation, postponement or adjournment thereof.

Whether or not you expect to attend the Annual Meeting, we urge you to vote your shares by following the instructions on the notice and access card or proxy card you received as promptly as possible to ensure your representation and the presence of a quorum at the Annual Meeting. If you submit your voting instructions prior to the Annual Meeting, you may still decide to attend the Annual Meeting and vote your shares during the Annual Meeting. Your proxy is revocable in accordance with the procedures set forth in the Proxy Statement accompanying this letter.

Thank you for your continued support.

Sincerely,

May 4, 2023

BJ’S WHOLESALE CLUB HOLDINGS, INC. 2023 PROXY STATEMENT

Our directors bring a mix of backgrounds and possess a broad range of skills and expertise that position the board to effectively oversee the company’s business. The matrix below summarizes key types of experience, qualifications, attributes and skills we value in directors and consider in evaluating the composition of our board.

We believe shareholders benefit from existence of diverse views

Of the eight director nominees, two are ethnically diverse. In addition, two of our director nominees are female. We believe this composition provides a diverse set of viewpoints and experiences that benefits shareholders. The number of directors that constitute the board decreased from ten to eight as a result of the departure of two directors in February 2023. The board intends to look for and identify two new qualified directors in due course. The board will, as part of its evaluation process, strive for a proper combination of skill sets and diversity of experience, gender, race and thought to successfully govern the company’s execution of its strategic priorities. Of the two open director positions, the board intends to identify and appoint at least one qualified female to a director position on the board.

 

We perform shareholder outreach throughout the year to engage with shareholders on issues that are important to them. During fiscal year 2022, we requested meetings with shareholders representing nearly 64.5% (as of June 30, 2022) of shares outstanding. The results of our shareholder outreach are reported to the board.

We have over 34,000 diverse and amazing team members. We believe that the diversity of our team members plays a vital role in the company’s culture and improves our ability to deliver growth and profitability.

 

*Above team member statistics are as of January 28, 2023.

We have an inclusion & diversity council which is comprised of a cross-functional team representing diversity of backgrounds, ethnicity, gender and self-identification. This council is responsible for identifying and driving actions and initiatives to advance the company’s inclusion and diversity mission.

This proxy statement (this “Proxy Statement”) and our annual report for the fiscal year ended January 28, 2023 (the “Annual Report” and, together with this Proxy Statement, the “proxy materials”) are being furnished to you by and on behalf of the Board of Directors of BJ’s Wholesale Club Holdings, Inc. (the “board”) in connection with our 2023 annual meeting of shareholders (the “Annual Meeting”). References herein to “fiscal year 2020”, “fiscal year 2021”, “fiscal year 2022”, “fiscal year 2023”, and “fiscal year 2024” refer to the 52 weeks or 53 weeks, as applicable, ending January 30, 2021, January 29, 2022, January 28, 2023, February 3, 2024 and February 1, 2025, respectively. As used herein, the terms “company”, “BJ’s”, “we”, “us” or “our” refer to BJ’s Wholesale Club Holdings, Inc. and its consolidated subsidiaries unless otherwise stated or the context otherwise requires. This Proxy Statement and Annual Report are first being distributed or made available, as the case may be, on or about May 4, 2023.

The board has adopted corporate governance guidelines. A copy of these corporate governance guidelines can be found in the “Governance Documents” section of the “Corporate Governance” page of our investor relations website located at investors.bjs.com, or by writing to our secretary at our corporate offices.

The company has a history of strong corporate governance. We are committed to governance policies and practices that serve the interests of the company and its shareholders. Over the years, our board has evolved our practices in the interest of our shareholders. Our governance practices and policies address the following topics, among others:

Our bylaws provide the board with flexibility to combine or separate the positions of chairperson of the board and chief executive officer in accordance with its determination that utilizing one or the other structure would be in the best interests of the company and its shareholders. In addition, our corporate governance guidelines provide that, in order to maintain the independent integrity of the board, if the chairperson of the board is a member of management or does not otherwise qualify as an independent director, the independent members of the board may appoint an independent director to serve as lead director.

The board understands that no single approach to board leadership is universally accepted and that the appropriate leadership structure may vary based on several factors, such as a company’s size, industry, operations, history and culture. Accordingly, the board, with the assistance of the nominating and corporate governance committee, assesses its leadership structure in light of these factors and the current environment to achieve the optimal model for us and for our shareholders.

After careful review and consideration of the company’s leadership structure, the board determined that, at this time, it is in the best interests of the company and its shareholders to combine the roles of chairman and chief executive officer and appoint Mr. Eddy as chairman of the board and chief executive officer, effective at the commencement of the Annual Meeting. The board believes that having Mr. Eddy serve as chairman and chief executive officer, a position he has held since 2021, will promote clear accountability and strong leadership, with one person setting the tone for the company’s employees, investors, customers and others stakeholders, and reflecting the optimal balance between independent oversight of management and unified leadership (i.e., the appropriate balance of authority between those persons charged with overseeing the company and those who manage it on a day-to-day basis). The board further believes that the company’s chief executive officer is best situated to serve as chairman because he is most familiar with the company’s business and industry, and most capable of effectively providing the unified leadership referenced above by identifying strategic priorities and carrying out the execution of the company’s strategy and business plans. The board believes that the combined position of chairman and chief executive officer will also promote the development of policy and business plans and will preserve transparency and facilitate information flow between management and the board by serving as an effective bridge for communication between the board and management on significant business developments and time-sensitive matters, which is essential to effective governance. To ensure the appropriate level of oversight continues between our independent directors and the chief executive officer, Mr. Steele will continue to serve as the lead independent director as set forth in our corporate governance guidelines. The board continues to expect that the lead director role will enhance and provide further assurances to our shareholders regarding the strong independent oversight exercised by the board. Mr. Steele was appointed lead director in May 2019 by the

independent members then serving on the board. As lead independent director, Mr. Steele presides over all meetings of the board at which the chairman of the board is not present, including executive sessions of independent directors; approves board meeting schedules and agendas; and acts as the liaison between the independent directors and the chairman of the board. The board believes that it has been able to, and will continue to, provide effective independent oversight of its business and affairs, including risks facing the company through the role of lead independent director, the independent committees of the board, the overall composition of the board and contributions from all of the independent directors and other corporate governance policies in effect.

Under our corporate governance guidelines and the New York Stock Exchange (the “NYSE”) rules, a director is not independent unless the board affirmatively determines that he or she does not have a direct or indirect material relationship with us or any of our subsidiaries. In addition, the director must meet the bright-line tests for independence set forth by the NYSE rules. The board has affirmatively determined that each of our directors, other than Mr. Eddy, our chief executive officer, and Mr. Baldwin, our chairman of the board, qualifies as independent under the applicable NYSE rules.

In arriving at the foregoing independence determinations, the board reviewed and discussed information provided by the directors with regard to each director’s business and personal activities and any relationships they have with us and our management. In making the director independence determinations regarding Messrs. Peterson and Steele, the board considered that they serve as an executive officer and on the board of directors of Newell Brands, Inc., respectively, one of the company’s vendors and from whom we purchase products in the ordinary course of business, on arm’s-length terms, in amounts and under other circumstances that the board determined did not affect Messrs. Peterson and Steele’s independence. In fiscal year 2022, the company’s payments to Newell Brands, Inc. were less than 1% of Newell Brands Inc.’s net sales, and Messrs. Peterson and Steele had no direct or indirect material interest in the sales Newell Brands, Inc. makes to the company.

The board has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee, each of which has the composition and the responsibilities described below. In addition, from time to time, special committees may be established under the direction of the board when necessary to address specific issues. Each of the audit committee, the compensation committee and the nominating and corporate governance committee operates under a written charter.

All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the NYSE. The board has affirmatively determined that each of Ms. Naylor and Messrs. Peterson and Steele qualifies as “independent” under the NYSE’s standards and Rule 10A-3 of the Exchange Act of 1934, as amended (the “Exchange Act”), applicable to audit committee members. In addition, the board of has determined that each of Ms. Naylor and Mr. Peterson qualifies as an “Audit Committee Financial Expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.

The board has determined that each of Messrs. Parent and Peterson qualify as “independent” under NYSE’s heightened standards applicable to compensation committee members and Messrs. Parent and Peterson qualifies as a “Non-Employee Director” as defined in Section 16b-3 of the Exchange Act.

The compensation committee has the authority to retain or obtain the advice of compensation consultants, legal counsel and other advisors to assist in carrying out its responsibilities. Before selecting any such consultant, counsel or advisor, the compensation committee reviews and considers the independence of such consultant, counsel or advisor in accordance with applicable NYSE rules. We must provide appropriate funding for payment of reasonable compensation to any consultant, counsel or advisor retained by the compensation committee.

The board has determined that each of Mr. Brown and Ms. Gloeckler qualifies as “independent” under applicable NYSE rules for purposes of serving on the nominating and corporate governance committee.

We continued to make progress on ESG matters throughout fiscal year 2022. Most notably:

The information contained on our website or that can be accessed through our website is not incorporated by reference and should not be considered a part of this Proxy Statement.

We regularly engage in outreach efforts with our shareholders. During fiscal year 2022, we requested meetings with shareholders representing 64.5% of shares outstanding and ultimately met by phone or videoconference with shareholders representing approximately 33.1% of shares outstanding. We provided an open forum to each shareholder to discuss and comment on our compensation, governance, ESG and other business practices. Overall, we received constructive feedback from shareholders. The company, after this engagement with its shareholders, agreed to continue to keep in contact with them, as well as the other shareholders who chose not to engage with the company at that time. Maintaining ongoing relationships with our shareholders, and understanding our shareholders’ views, is a priority for both our board and management team.

Our corporate governance guidelines, charters of the audit committee, compensation committee and nominating and corporate governance committee and other corporate governance information are available under the “Governance Documents” section of the “Corporate Governance” page of our investor relations website located at investors.bjs.com, or by writing to our secretary at our corporate offices.

We have adopted a code of business ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. A copy of our code of business ethics is available under the “Governance Documents” section of the “Corporate Governance” page of our investor relations website located at investors.bjs.com, or by writing to our secretary at our corporate offices. We intend to make any legally required disclosures regarding amendments to, or waivers of, provisions of our code of business ethics on our website rather than by filing a current report on form 8-K.

The board has adopted an insider trading compliance policy, which applies to all of our directors, officers and certain designated employees. The policy prohibits our directors, officers and certain designated employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, short sales and transactions in publicly traded options, such as puts, calls and other derivatives involving our equity securities and also prohibits the pledging of the company’s securities as collateral to secure loans. None of our NEOs has engaged in any hedging transactions with respect to our common stock or pledged any of his or her shares of common stock in the company.

During fiscal year 2022, the board met four times, the audit committee met seven times, the compensation committee met four times and the nominating and corporate governance committee met four times. During fiscal year 2022, each of our directors attended at least 75% of the aggregate of (1) the total number of meetings of the board held during the period for which he or she was a director and (2) the total number of meetings for all committees of the board of directors on which he or she served during the periods that he or she served.

Our corporate governance guidelines require that the board hold executive sessions, which are meetings of the non-management members of the board, at least twice per year, and that our independent directors meet in a private session that excludes management and any non-independent directors at least once per year. Details of our executive session practices can be found in the “Board of Directors” section of the “Corporate Governance” page of our investor relations website located at investors.bjs.com.

We do not have a formal policy regarding the attendance of our board members at our annual meetings of shareholders, but we expect all directors to make every effort to attend any meeting of shareholders. All members of the board then serving attended the 2022 annual meeting of shareholders.

Any shareholder or any other interested party who desires to communicate with the board, our non-management directors or any specified individual director, may do so by directing such correspondence to the attention of the secretary at our offices at 350 Campus Drive, Marlborough, Massachusetts 01752. The secretary will forward the communication to the appropriate director or directors.

We believe that all of our directors and nominees display personal and professional integrity, satisfactory levels of education and/or business experience, broad-based business acumen, an appropriate level of understanding of our business and its industry and other industries relevant to our business, the ability and willingness to devote adequate time to the work of the board and its committees, skills and personality that complement those of our other directors that helps build a board that is effective, collegial and responsive to the needs of our company, strategic thinking and a willingness to share ideas, a diversity of experiences, expertise and background and the ability to represent the interests of all of our shareholders.

Each director nominee is currently serving as a director of the company. We have no reason to believe that any director nominee will be unable or unwilling to serve, if elected. If, however, prior to the Annual Meeting, the board of directors should learn that any director nominee is unable or unwilling to serve as a director for any reason, and if the board shall designate a substitute nominee, the persons named as proxies will vote for the election of the substitute nominee designated by the board. Alternatively, the persons named as proxies, at the board’s discretion, may vote for that fewer number of nominees as results from the inability of any nominee to serve.

Generally, vacancies or newly created directorships on the board will be filled only by vote of a majority of the directors then in office and will not be filled by the shareholders, unless the board determines by resolution otherwise.

The board unanimously recommends you vote FOR the election of each of Chris Baldwin, Darryl Brown, Bob Eddy, Michelle Gloeckler, Maile Naylor (nee Clark), Ken Parent, Chris Peterson and Rob Steele as a director to hold office until the 2024 Annual Meeting and until his or her successor has been duly elected and qualified.

The information presented below regarding each director nominee also sets forth specific experience, qualifications, attributes and skills, in addition to those set forth above that led the board to the conclusion that such individual should serve as a director in light of our business and structure.

The board is responsible for approving the compensation of our non-employee directors, provided that the compensation committee may make recommendations to the board with respect to non-employee director compensation. For fiscal year 2022, no changes were made to our non-employee director compensation.

The following table sets forth information concerning the compensation of our non-employee directors during fiscal year 2022. Mr. Eddy, our current president and chief executive officer was an employee of the company during fiscal year 2022 and, therefore, did not receive compensation for his service as a director. The compensation of Mr. Eddy is reflected in the Summary Compensation Table.

Pursuant to our non-employee director compensation policy, each non-employee director will receive a cash retainer for service on the board and for service on each committee on which the director is a member in the following amounts:

The annual retainers are earned on a quarterly basis based on a calendar quarter and are paid by the company in arrears not later than the fifteenth day following the end of each calendar quarter. In the event a non-employee director does not serve as a director or in the applicable committee or board positions for an entire calendar quarter, such director will receive a pro-rated portion of the applicable retainers otherwise payable to such director for such calendar quarter. We also reimburse our non-employee director for any travel or other business expenses related to their service as a director.

In addition to the annual cash retainers, each non-employee director receives an annual restricted stock unit grant with a fair market value on the date of grant of $150,000 per year, which is made pursuant to the BJ’s Wholesale Club Holdings, Inc. 2018 Incentive Award Plan (the “2018 Plan”). The annual equity award will be granted on the date of the annual meeting of shareholders or on the date of such director’s election or appointment to the board, which awards will also be prorated if a director is elected or appointed as of a date other than the date of the annual meeting of shareholders. Each director may elect to defer the annual restricted stock unit award, subject to compliance with Section 409A of the Internal Revenue Code, and the board may determine, in its sole discretion, that such annual equity grant be in the form of deferred stock or in shares of common stock with equivalent value on the date of grant. Each equity award will vest and become exercisable on the earlier of (i) the day immediately preceding the date of the first annual meeting of shareholders following the date of grant and (ii) the first anniversary of the date of grant, subject to the director continuing in service on the board through the applicable vesting date. No portion of an annual equity award that is unvested or unexerciseable at the time of a director’s termination of service on the board will become vested and exercisable thereafter. In the event a director is terminated upon or within 12 months following a change in control, as defined in the 2018 Plan, such director’s outstanding equity awards will accelerate and vest in full.

During fiscal year 2022, the role of executive chair transitioned to non-executive chair and, was awarded $200,000 in incremental compensation which included a $150,000 cash retainer and $50,000 in restricted stock units which was in addition to the annual equity award for non-employee directors noted above. The incremental compensation was evaluated by Exequity (as defined and described below in “Engagement of compensation consultant”) and found to be consistent with the company’s peer groups.

The board adopted the director stock ownership guidelines, pursuant to which non-employee directors are required to own equity in the company at least equal to five times their retainer within five years of their election or appointment. Please see the disclosure under “Executive Compensation—Director and executive stock ownership guidelines” for more information.

We encourage our shareholders to review the “Executive Compensation” section of this Proxy Statement for more information. As an advisory approval, this proposal is not binding upon us or the board. However, the compensation committee, which is responsible for the design and administration of our executive compensation program, values the opinions of our shareholders expressed through your vote on this proposal. The board and the compensation committee will consider the outcome of this vote in making future compensation decisions for our named executive officers. Accordingly, we ask our shareholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the shareholders of BJ’s Wholesale Club Holdings, Inc. approve, on an advisory basis, the fiscal year 2022 compensation of BJ’s Wholesale Club Holdings, Inc.’s named executive officers as described in the Compensation Discussion and Analysis and disclosed in the Summary Compensation Table and related compensation tables and narrative disclosure set forth in BJ’s Wholesale Club Holdings, Inc.’s Proxy Statement for the 2023 Annual Meeting of Shareholders.”

The board unanimously recommends you vote FOR the resolution to approve, on an advisory (non-binding) basis, the compensation of our NEOs, as described in the Compensation Discussion and Analysis and disclosed in the Summary Compensation Table and related compensation tables and narrative disclosure set forth in this Proxy Statement.

This section (“Compensation Discussion and Analysis”) discusses the philosophy and material components of our executive compensation program for our named executive officers and the objectives driving the associated practices and decisions.

Our executive compensation program is designed to be flexible and complementary and to collectively serve the principles and objectives of our compensation and benefits programs, including to reflect shareholder values, enhance the link between executive pay and company performance, respond to changing market practices and retain effective leaders who have a significant understanding of our business.

Our NEOs for fiscal year 2022 were:

 

Our executive team is critical to our success and to building value for our shareholders. The principles and objectives of our executive compensation program are to:

ATTRACT, engage and retain the best executives, with experience and managerial talent, enabling us to be an employer of choice in a highly competitive and dynamic industry

ALIGN compensation with our corporate strategies, business and financial objectives and the long-term interests of our shareholders

MOTIVATE and reward executives whose knowledge, skills and performance ensure our continued success

ENSURE that our total compensation is fair, reasonable and competitive

The principal components of our executive compensation program are designed to fulfill one or more of the principles and objectives described above. Compensation of our NEOs includes each of the following key elements:

We view each component of our executive compensation program as related, but distinct, and we also regularly reassess the total compensation of our executive officers to ensure that our overall compensation objectives are met. In addition, we have determined the appropriate level for each compensation component, which is based on our understanding of the competitive market based on the experience of the members of the compensation committee, advice and information provided by Exequity (as defined and described below in “Engagement of compensation consultant”), our recruiting and retention goals, our view of internal equity and consistency, the length of service of our executive officers, our and each executive officer’s overall performance, and other considerations the compensation committee considers relevant. Our executive compensation program is designed to be flexible and complementary and to collectively serve all of the executive compensation principles and objectives described above.

We offer cash compensation, in the form of base salaries, annual company performance-based bonuses and, as circumstances warrant, discretionary individual performance-based bonuses, that we believe appropriately rewards our executive officers for their contributions to our business. When making awards, the compensation committee considers the company’s financial and operational performance. A key component of our executive compensation program is long-term incentive awards, which are comprised of performance-based and time-based awards as noted above. We emphasize the use of long-term equity awards to incentivize our executive officers to focus on the growth of our overall enterprise value and, correspondingly, the creation of value for our shareholders. Except as described below, we have not adopted any formal or informal policy or guidelines for allocating compensation between currently paid and long-term compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.

Each of the primary elements of our executive compensation program is discussed in more detail below.

The following table highlights key features of our executive compensation program that demonstrate the company’s ongoing commitment to promoting shareholder interests through sound compensation governance practices.

The compensation committee oversees key aspects of the company’s executive compensation programs, including, base salaries, annual incentive and long-term incentive awards, and perquisites or other benefits for the company’s executive officers, including our NEOs. The compensation committee approves performance goals for awards granted under our incentive compensation programs. In making its decisions the compensation committee considers a variety of factors, including, but not limited to:

The chief executive officer and management team manage the compensation programs based on the compensation committee’s decisions and directives. The chief executive officer makes recommendations to the compensation committee regarding compensation of executive officers other than himself.

The compensation committee is authorized to retain the services of one or more executive compensation advisors, in its discretion, to assist with the establishment and review of our compensation programs and related policies. In accordance with its authority to retain consultants and advisors described above, the compensation committee continued to engage the services of Exequity, LLP (“Exequity”), a national compensation consulting firm, as its compensation consultant to provide executive compensation advisory services, help evaluate our compensation philosophy and objectives and provide guidance in administering our compensation program and policies.

All services related to executive compensation provided by Exequity during fiscal year 2022 were conducted under the direction or authority of the compensation committee, and all work performed by Exequity was pre-approved by the compensation committee. Neither Exequity nor any of its affiliates maintains any other direct or indirect business relationships with us or any of our subsidiaries. Additionally, during fiscal year 2022, Exequity did not provide any services to us unrelated to executive and director compensation.

The compensation committee evaluates Exequity’s independence on an annual basis and has evaluated whether any work provided by Exequity raised any conflict of interest under applicable SEC or NYSE rules for services performed during fiscal year 2022 and determined that it did not.

The compensation committee generally approves annual compensation levels for NEOs in the first quarter of each fiscal year, though it may make adjustments to compensation at other times of the year. When determining base salaries, annual bonuses, long-term incentive awards, and other forms of compensation, the compensation committee takes into consideration a variety of information, including, but not limited to, data generated from the compensation practices of its peer group companies, internal equity, an executive’s experience, knowledge of our business and the retail industry, scope of responsibility, corporate performance and individual performance. In particular, the compensation committee made the following key compensation decisions for fiscal year 2022:

To gain a general understanding of our current compensation practices, the compensation committee reviews the compensation of executives serving in similar positions at peer group companies. The external market data reviewed for fiscal year 2022 was provided by Exequity.

In reviewing and developing the peer group companies for fiscal year 2022, the compensation committee considered, at the recommendation of Exequity, industry, annual revenue, market capitalization, enterprise value, EBITDA and gross margin, among other factors for each company. With respect to its executive compensation program, the company is reasonably positioned near the median of the peer group companies based on market capitalization and enterprise value. The compensation committee reviews and develops the peer group companies annually with input from Exequity. In its 2021 review of the peer group for setting fiscal 2022 compensation, the compensation committee removed The Michaels Companies, Inc in connection with it being acquired by Apollo and added Albertsons Companies, Inc. and Petco Health and Wellness Company, Inc. to the peer group as identified and recommended by Exequity.

In fiscal year 2022, the compensation committee considered the pay practices and compensation levels of executives serving in similar positions at the peer group companies when it determined the base salary adjustments, the promotional awards, the change in the target payout levels under our Annual Incentive Plan and the size and mix of equity awards granted to our NEOs, each as described below.

We believe it is important to provide a competitive fixed level of pay to attract and retain experienced and successful executives. Annual base salaries compensate our NEOs for fulfilling the requirements of their respective positions and provide them with a level of cash income predictability and stability with respect to a portion of their total compensation.

The following table sets forth fiscal year 2022 and fiscal year 2021 annual base salaries for our NEOs:

The base salaries of our executive officers, including our NEOs, are reviewed periodically by the compensation committee and our chief executive officer (except with respect to his own base salary), and adjustments are made as deemed appropriate. In determining the amount of base salary that each NEO receives, we consider the executive’s current compensation, tenure, any change in the executive’s position or responsibilities and the complexity and scope of the executive’s position and responsibilities as compared to those of other executives within the company and in similar positions at the peer group companies.

The base salaries for Messrs. Eddy and Cichocki did not change in fiscal year 2022 from fiscal year 2021. The increases to the base salaries of Messrs. Desroches and Kessler and Ms. Felice for fiscal year 2022 were designed to maintain or establish, as applicable, each NEO’s base salary near the median of his or her counterparty within the peer group companies and were based on the compensation committee’s review of the benchmarking data for the peer group companies provided by Exequity.

Our Annual Incentive Plan, which became effective on January 29, 2017 (the “Annual Incentive Plan”) is designed to reward participants, including our NEOs, for their contributions to the company based on the achievement of pre-established company financial metrics, adjusted EBITDA and comparable club sales. Prior to fiscal year 2022, awards under the Annual Incentive Plan were determined solely based on the achievement of adjusted EBITDA. In fiscal year 2022, the compensation committee determined to include a top line performance measurement, comparable club sales, as an additional basis for determining achievement under the Annual Incentive Plan, in order to expand each NEO’s accountability for company results beyond adjusted EBITDA. As each NEO’s performance contributes to these metrics, we believe they provide a fair and objective basis on which to evaluate each NEO’s performance and to determine each NEO’s annual cash incentive award under the Annual Incentive Plan.

The compensation committee assigns our NEOs an annual cash incentive target opportunity expressed as a percentage of base salary. For fiscal 2022, these formula-driven cash payouts could have ranged from zero, if company performance fell below minimum thresholds, to 100% of annual incentive opportunity, if the targets were met, and up to a maximum of 200% of the target annual incentive opportunity if performance exceeded target. Our Annual Incentive Plan provides the compensation committee with the authority to reduce the amount of annual incentive paid to a participant, or some or all participants, if the compensation committee determines that such reduction is appropriate. The compensation committee established minimum, target and maximum levels of performance for the adjusted EBITDA and comparable club sales goals shortly after the beginning of fiscal year 2022, based on an assessment of the operating landscape for fiscal year 2022, which may result in variations in these established levels from year to year. Overall, the goals for adjusted EBITDA for fiscal year 2022 were largely consistent with the prior year, and, as referenced above, comparable club sales was added as an additional basis for determining achievement under the Annual Incentive Plan.

The table below illustrates the relationship between actual adjusted EBITDA and comparable club sales performance for fiscal year 2022 as compared to performance targets, the percentage of performance targets earned and the resulting aggregate cash incentive award attainment determined with interpolation applying for amounts between levels.

Each NEO’s target annual cash incentive award opportunity is expressed as a percentage of his or her base salary in effect at fiscal year-end and is based on peer group benchmark data and the scope of responsibility and impact the executive has on the company’s overall results. In fiscal year 2022, the compensation committee maintained each NEO’s target payout percentage for his or her fiscal year 2022 award, consistent with fiscal year 2021.

Given the base salary increases for Ms. Felice and Messrs. Desroches and Kessler, each NEO’s target annual cash incentive award opportunity increased for fiscal year 2022. These increases were intended to more closely align each NEO’s potential annual total cash compensation with the median of the annual total cash compensation paid to executives with similar roles and responsibilities at the peer group companies.

The following table sets forth fiscal year 2022 target bonuses for each of our NEOs as a percentage of base salary, the percentage of target bonus earned for each NEO as a percentage of base salary and the cash incentive award amounts that were paid to each NEO for fiscal year 2022 based on the achievement of the goals described above.

For fiscal year 2022, each of our NEOs received long-term incentive awards comprised of performance share units and restricted stock awards. We designed these awards primarily to motivate, reward and retain our executive officers in a manner that best aligns their interests with the interests of our shareholders. Our executive officers earn performance share units based on the achievement of pre-defined cumulative adjusted EPS goals over a three-year performance period, determined by the compensation committee, and we believe these types of awards provide a direct line of sight for the NEOs between our financial performance and their long-term incentive rewards. Furthermore, the restricted stock component of our long-term incentive awards closely aligns the incentives provided by these awards with the interests of our shareholders as our executive officers benefit from restricted stock awards when the market price of our common stock increases and all changes to the value of stock, whether positive or negative, directly correspond to those experienced by our shareholders. Therefore, we believe that restricted stock awards and performance

share units provide meaningful incentives to our executive officers to achieve increases in the value of our stock over time and are an effective tool for meeting our compensation goals of increasing long-term shareholder value by tying the value of the awards to our future performance and by aligning executive officer compensation with the interests of our shareholders.

Historically, when determining the amount and terms of equity compensation awards, we considered, among other things, market information provided by Exequity, individual performance history, job scope, function, title, outstanding and unvested equity awards and comparable awards granted to other executives at similar levels at the peer group companies. The compensation committee has also drawn upon the experience of its members in making such determinations.

Based on these considerations, the compensation committee determined not to increase the long-term incentive award amounts for the NEOs for fiscal year 2022, except for Ms. Felice. Ms. Felice’s long-term incentive award amount was increased from $1.2 million to $1.5 million, or by 25%, in order to migrate her total compensation closer to the median of her counterparty within the peer group companies, given her promotion to chief financial officer in 2021, and was based on the compensation committee’s review of the benchmarking data for the peer group companies provided by Exequity. The following table sets forth the types of awards we granted, weighting (based on target value) allocated to each type of award for each of our NEOs and vesting terms of our long-term incentive compensation for fiscal year 2022:

We granted performance share unit awards to our NEOs in fiscal year 2022 for 50% of their long-term incentive compensation awards. The performance share unit awards may be earned by our NEOs based on cumulative adjusted EPS growth achieved over a three-year performance period from January 30, 2022 to February 1, 2025. Cumulative adjusted EPS means the sum of the earnings per share, determined by the compensation committee in its sole discretion in accordance with generally accepted accounting practices in the United States, for each of the three fiscal years in the applicable performance period, adjusted to account for: (i) unusual or one-time items of expense or income, including without limitation, asset impairment charges, charges associated with closing or relocating of a club, charges related to debt refinancing or other capital market transactions; (ii) income or expense related to discontinued operations; (iii) restructuring charges including severance charges related to the restructuring and any other non-recurring or out of period charge as approved by the compensation committee and the tax impact of the foregoing adjustments on net income; (iv) the effects of acquisitions, divestitures, stock split-ups, stock dividends or distributions, recapitalizations, warrants or rights issuances or combinations, exchanges or reclassifications with respect to any outstanding class or series of our common stock; (v) a corporate transaction, such as any merger of the company with another corporation, any consolidation of the company and another corporation into another corporation, any separation of the company or its business units; or (vi) any reorganization of us, or any partial or complete liquidation or sale of all or substantially all of our assets. We use cumulative adjusted EPS to set our performance target under the performance share unit awards because we believe (a) it aligns closely with overall shareholder value and indicates our ability to create the same and (b) it is a metric commonly used by companies in our peer group and in the general industry. As each NEO’s performance contributes to this metric, we believe it provides a fair and objective basis on which to evaluate each NEO’s performance and to determine each NEO’s performance share unit award.

The number of units that will be earned, as a percentage of the of the target number of units granted, is based on threshold, target and maximum levels of performance established by the compensation committee shortly after the beginning of fiscal year 2022, based on their assessment of the company outlook, which may result in variations in these established levels from year to year. For fiscal year 2022, consistent with prior years, the adjusted EPS performance levels were increased based on growth expectations for the business. If our cumulative adjusted EPS does not equal or exceed the threshold level established, then our NEOs will not be entitled to earn any shares pursuant to these performance share units. To the extent our performance falls between two of the established levels of performance, the percentage earned will be determined based on straight-line interpolation between the percentages that would have been earned for the established levels of performance. Pursuant to these levels of performance, each NEO could earn between 0% and 200%, respectively, of his or her target performance share units. The shares earned, if any, will cliff vest as of the end of the three-year performance period based on continued employment through such date. For fiscal year 2022, the percentage each NEO could earn based on threshold level of performance was reduced from 50% to 0% in connection with the company generally making pay out requirements more difficult to achieve based on expected growth of the business.

The table below illustrates the relationship between level of achievement and the performance share unit awards earned as a percentage of target performance, with interpolation applying for amounts between levels.

We also granted restricted stock awards to our NEOs for fiscal year 2022. These awards comprise 50% of their long-term incentive compensation awards and vest in three equal annual installments commencing on April 1, 2023, subject to continued employment through such dates. The following table sets forth the restricted stock awards granted to each of our NEOs for fiscal year 2022.

In connection with the transition from non-qualified stock options to performance share units in fiscal year 2020, the compensation committee determined, after considering retention factors associated with the equity scheduled to vest each year given the new delayed vesting period associated with the performance shares units as opposed to the annual vesting associated with the non-qualified stock options, to grant cash transition awards equivalent to 25% of the annual long-term incentive award grant for fiscal year 2020 (and for Ms. Felice, for fiscal year 2021), with one-third of the cash transition award vesting after one year and the remaining two-thirds of the award vesting the year thereafter. The following table sets forth the cash transition awards paid in fiscal year 2022 and fiscal year 2021.

We have established a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements. Under the 401(k) plan, eligible employees may elect to reduce their current compensation by up to the prescribed annual limit and contribute these amounts to the 401(k) plan. This plan provides for company matching contributions of 50% of the first 6% of an employee’s covered compensation.

We maintain an executive retirement plan (the “Executive Retirement Plan”) in which a select group of our management and highly compensated employees are eligible to participate. Participants are selected by the compensation committee and are entitled to company contributions within 60 days of fiscal year end under the plan (the “Annual Retirement Contribution”) if they are actively employed by the company on the last day of a plan year or if they are terminated prior to the end of the plan year due to (i) retirement on or after the attainment of age 55 or (ii) disability. Each year the company makes an Annual Retirement Contribution to each participant under this plan with at least four years of credited service in an amount equal to at least 3% of the participant’s after-tax base salary earned for such year. For fiscal year 2022, we made a contribution of 5% of each NEO’s base salary, consistent with prior years. Annual Retirement Contributions to participants with at least four years of service are considered taxable income to the participants, and we make an additional tax gross-up contribution to each of these participants each year. For participants with less than four years of service by the end of the applicable plan year, the participant will accrue the right to an Annual Retirement Contribution each year, and, subject to continued employment, in the plan year in which the participant is first credited with four years of service, the company will make an aggregate retirement contribution on behalf of the participant equal to the amount of the Annual Retirement Contribution for the applicable plan year and the previous three plan years (along with a tax gross-up contribution). Notwithstanding the foregoing, we have elected to make Annual Retirement Contributions on behalf of Mr. Cichocki though he has not yet achieved four years of credited service. If the employment of Mr. Cichocki is terminated prior to achieving four years of credited service, he will forfeit any company contributions made under the plan. Tax gross up payments will be made to Mr. Cichocki when he achieves four years of credited service. Upon a change of control, each participant with less than four years of credited service will become fully vested in any benefit accrued under the plan, and each participant will receive an Annual Retirement Contribution for the year in which the change of control occurs.

Participants generally may elect to invest their balance under the Executive Retirement Plan in a variety of different tax-deferred investment vehicles. However, the company selects the investments with respect to Annual Retirement Contributions made on behalf of Mr. Cichocki since he has not yet achieved four years of credited service.

Additional benefits received by our employees, including our NEOs, include medical and dental benefits, flexible spending accounts, short-term and long-term disability insurance and accidental death and dismemberment insurance. We also provide basic life insurance coverage to our employees, as well as executive life insurance to certain key executives, including our NEOs. We reimburse certain financial counseling and estate planning expenses for certain executives, including our NEOs. We believe providing such perquisites enables us to provide a competitive package that allows us to attract and retain top talent.

In addition, Mr. Eddy is provided an allowance to use company aircraft for personal use. We have a written policy that sets forth guidelines and procedures regarding personal use of company aircraft. Mr. Eddy (and immediate family members traveling with him) may use our company aircraft for up to $200,000 per calendar year of personal flight time. We do not reimburse for taxes relating to any imputed income for his personal travel and the personal travel of his family members when they are accompanying him. For fiscal year 2022, the aggregate incremental cost of Mr. Eddy’s personal use of company aircraft was $137,049. Such aggregate incremental cost of the personal use of our company aircraft reflects the marginal incremental private plane charter costs to the company and excludes any fixed contract costs.

We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices in the competitive market.

We do not view perquisites, other than the use of company aircraft as discussed above, or other personal benefits as a significant component of our executive compensation program. We view the personal use of a company aircraft to be a significant benefit that assists us in attracting and retaining top talent while allowing our executives to serve the company without personal travel related distractions. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual executive officer in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation or retention purposes. All future practices with respect to perquisites or other personal benefits for our NEOs will be approved and subject to periodic review by the compensation committee and we do not expect such perquisites to become a significant component of our compensation program.

We have entered into employment agreements with each of our NEOs and believe that it is in the best interests of our shareholders to extend the severance benefits set forth therein to our executives to reinforce and encourage retention and focus on shareholder value creation without distraction. In determining the appropriate severance entitlements to provide our NEOs, we looked to general market trends in consultation with our compensation consultant, Exequity. The material elements of these employment agreements are summarized below under “—Employment agreements and potential payments upon termination or change in control.”

In order to complement our compensation programs and further align the interests of our NEOs with those of our shareholders, our board adopted executive stock ownership guidelines pursuant to which (i) our chief executive officer is required to own equity in the company equal to at least five times his annual base salary, (ii) each executive vice president is required to own equity in the company equal to at least three times his or her annual base salary and (iii) each senior vice president is required to own equity in the company equal to at least one times his or her annual base salary. Please see the disclosure under “—Director and executive stock ownership guidelines” for more information.

None of our NEOs has engaged in any hedging transactions with respect to our common stock or pledged any of his or her shares of common stock in the company. Additionally, our board adopted an anti-hedging and anti-pledging policy, which applies to all of our directors, officers and certain designated employees. The policy prohibits our directors, officers and certain designated employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, short sales and transactions in publicly traded options, such as puts, calls and other derivatives involving our equity securities and also prohibits the pledging of the company’s securities as collateral to secure loans.

We have adopted a clawback policy that allows the company to recoup cash and equity incentive compensation paid to, earned by or granted to our executive officers during the three completed fiscal years preceding the publication of a restatement of the company’s financial statements if the financial results that are the subject of a restatement had been materially misstated due to an act of embezzlement, fraud, intentional misconduct or breach of fiduciary duty by any of our executive officers. In such circumstances, the company may recoup the amount of cash and equity incentive compensation that was paid, earned or granted as a result of the incorrectly reported financial results of the company that were the subject of the restatement that would not have been paid, earned or granted, as applicable, if determined based on the financial results of the company set forth or reflected in the company’s restated financial statements. Our clawback policy applies to all incentive compensation approved or awarded on or after March 3, 2020 and may be updated from time to time to comply with applicable laws, regulations and listing standards. In light of the SEC’s adoption of final clawback rules in October 2022 and the NYSE’s proposed rule in February 2023, we intend to update our clawback policy to comply with applicable NYSE listing rules when effective.

Generally, Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), disallows a tax deduction to any publicly held corporation for any individual remuneration in excess of $1 million paid in any taxable year to certain “covered employees.”

Our compensation committee believes that our shareholders’ interests are best served if its discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expense. Therefore, the compensation committee may implement programs that recognize a full range of criteria important to our success and to ensure that our executive officers are compensated in a manner consistent with our best interests and those of our shareholders, even where the compensation paid under such programs may not be deductible under Section 162(m) of the Internal Revenue Code.

Section 280G of the Internal Revenue Code disallows a tax deduction with respect to excess parachute payments to certain executives of companies which undergo a change in control. In addition, Section 4999 of the Internal Revenue Code imposes a 20% penalty on the individual receiving the excess payment. Parachute payments are compensation that is linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G based on the executive’s prior compensation. In approving the compensation arrangements for our NEOs in the future, the compensation committee will consider all elements of the cost to the company of providing such compensation, including the potential impact of Section 280G. However, the compensation committee may, in its judgment, authorize compensation arrangements that could give rise to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract and retain executive talent.

Section 409A of the Internal Revenue Code requires that “non-qualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments and certain other matters. Failure to satisfy these requirements can expose employees and other service providers to accelerated income

tax liabilities, penalty taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is our intention to design and administer our compensation and benefits plans and arrangements for all of our employees and other service providers, including our NEOs, so that they are either exempt from, or satisfy the requirements of, Section 409A.

We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718, for our stock-based compensation awards. ASC Topic 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based awards in their income statements over the period that an employee is required to render service in exchange for the award. Grants of stock options, restricted stock, restricted stock units and other equity-based awards under our equity incentive award plans will be accounted for under ASC Topic 718. The compensation committee will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.

The table below (“Summary Compensation Table”) sets forth the compensation earned by or paid to our NEOs for fiscal year 2022, fiscal year 2021 and fiscal year 2020 presented in accordance with SEC rules. Ms. Felice was not an NEO in fiscal year 2020. Mr. Kessler was not an NEO in fiscal year 2021.

 

The following table sets forth information regarding grants of plan-based awards made to our NEOs during fiscal year 2022:

 

Our executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and grants of plan-based awards table for fiscal year 2022 was paid or awarded, are described above under “—Compensation Discussion and Analysis.”

In fiscal year 2022, we granted restricted stock awards and performance share unit awards to each of our NEOs. All awards were granted pursuant to the 2018 Plan, as described above in the grants of plan-based awards table for fiscal year 2022. The vesting of each award is subject to acceleration and post-termination exercisability in connection with the death or disability of the NEO as well as certain termination triggering events described below under “—Employment agreements and potential payments upon termination or change in control.” To the extent we pay dividends in the future, dividends otherwise payable with respect to unvested shares of restricted stock will be retained by us and will only be paid if and when the underlying shares of restricted stock vest.

The terms of the employment agreements that we have entered into with our NEOs are described below under “—Employment agreements and potential payments upon termination or change in control.”

The following table sets forth certain information with respect to outstanding equity incentive plan awards held by our NEOs as of January 28, 2023: