Thirteen Weeks (Second Quarter) and Twenty-Six Weeks Ended August 1, 2009 versus Thirteen and Twenty-Six Weeks Ended August 2, 2008

Critical Accounting Policies and Estimates

The preparation of our unaudited quarterly financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Some accounting policies have a significant impact on amounts reported in these financial statements. A description of our critical accounting policies is contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2009 in the "Critical Accounting Policies and Estimates" section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Net sales for the quarter ended August 1, 2009 decreased 5.2% to $2.51 billion from $2.64 billion reported in last year's second quarter. Net sales for the first half of the current year totaled $4.77 billion, a decrease of 2.7% compared to last year's first half. These decreases were attributable to a 7.7% decrease in comparable club sales for the second quarter and a 4.8% decrease in comparable club sales for the first half of the year, in each case partially offset by sales from new clubs and gasoline stations. Much higher retail gasoline prices throughout the first half of last year contributed to gasoline sales in 2009 that were approximately 50% below last year.

                                            Thirteen            Twenty-Six
                                          Weeks Ended          Weeks Ended
                                         August 1, 2009       August 1, 2009
     Merchandise comparable club sales              2.9 %                5.0 %
     Impact of gasoline sales                     (10.6 )%              (9.8 )%

     Comparable club sales                         (7.7 )%              (4.8 )%

Merchandise comparable club sales increased 2.9% and 5.0% in this year's second quarter and first half, respectively, due largely to increases in food sales, particularly in perishables. Food accounted for approximately 65% of merchandise sales in this year's second quarter and year-to-date periods versus 64% in last year's second quarter and year-to-date period. On a comparable club basis, food sales increased by approximately 6% in this year's second quarter and increased by approximately 7% year-to-date. Also on a comparable club basis, general merchandise sales decreased by approximately 2% in this year's second quarter and increased by approximately 1% year-to-date. Comparable club merchandise sales in this year's second quarter were unfavorably affected by unseasonably cool and wet weather in the Northeast, weak discretionary consumer spending, and increased price deflation, particularly in some perishables departments.

Excluding sales of gasoline, customer count on a comparable club basis increased by approximately 4% in this year's second quarter and increased by approximately 5% in the year-to-date period. The average transaction amount by the same measure decreased approximately 1% in this year's second quarter and was approximately flat in the year-to-date period. Second quarter traffic and average transaction amounts were unfavorably impacted by the weather and deflation issues discussed above.

Membership fee income was $45.3 million in this year's second quarter versus $44.3 million in last year's comparable period. This 2.0% increase was due to strong renewal rates and the benefit from opening more new clubs earlier this year compared to last year. Our new clubs opened to date in 2009 have also exceeded our plans in terms of total members. For the year-to-date period, membership fee income was $89.6 million this year compared to $88.4 million last year.

Other revenues were $13.9 million in this year's second quarter versus $14.0 million last year. For the year-to-date period, other revenues were $24.9 million this year compared to $24.6 million last year.

Cost of sales (including buying and occupancy costs) was 91.24% of net sales in this year's second quarter versus 92.39% in last year's second quarter. The 115 basis point improvement reflected a favorable impact from decreased sales of low margin gasoline of 115 basis points and favorable merchandise margins of 46 basis points. Merchandise margins benefited from a favorable sales mix of high margin perishables, lower freight expense due to reductions in fuel costs, and operational improvements that lowered shrinkage and salvage costs. These improvements in cost of sales as a percentage of sales were partially offset by de-leveraging of buying and occupancy costs of approximately 45 basis points, due primarily to lower gasoline sales.

Year-to-date cost of sales (including buying and occupancy costs) was 91.35% of net sales this year versus 92.57% last year. The 122 basis point improvement was driven by the same factors as cited for the second quarter. More specifically, the decrease reflected a favorable impact from weak sales of low margin gasoline of 110 basis points; favorable merchandise margins of 47 basis points; and de-leveraging of buying and occupancy costs of 35 basis points.

Selling, general and administrative expenses ("SG&A") were 8.60% of net sales in this year's second quarter versus 7.62% in last year's comparable period. SG&A expense experienced de-leveraging due to gasoline sales that were well below last year. The increase of 98 basis points was attributable mainly to increases of 62 basis points in club and home office payroll expenses, 29 basis

Year-to-date SG&A expenses were 8.83% of net sales this year versus 7.95% last year. The increase of 88 basis points in the year-to-date period was driven largely by the same factors as cited in the second quarter. Club and home office payroll expenses increased by 53 basis points. Club and home office fringe benefits expenses, including bonus expense and share-based compensation, increased by 28 basis points and other miscellaneous expenses increased by seven basis points.

Total SG&A expenses for the second quarter increased by $14.3 million, or 7.1%, from last year's second quarter. The growth in SG&A versus last year was driven primarily by increases in club payroll expenses, medical insurance costs, and IT Roadmap costs. Payroll and payroll benefits (including stock compensation) accounted for 77% of all SG&A expenses in this year's second quarter compared to 76% in last year's second quarter. For the year-to-date period, total SG&A expenses rose by $31.5 million, or 8.1%. The percent growth was lower in the second quarter compared to the first quarter of this year due to a decrease in gasoline credit card costs which rose significantly in the second quarter of last year due to high gasoline retail prices. Payroll and payroll benefits (including stock compensation) accounted for 77% of all SG&A expenses in this year's first six months compared to 75% in last year's first six months.

Preopening expenses were $3.8 million in this year's second quarter versus $0.1 million in last year's second quarter. Year-to-date preopening expenses totaled $5.4 million this year versus $0.7 million last year. These increases reflected spending on three new clubs that opened during this year's second quarter and one new club that opened in the beginning of the third quarter. Only one new club opened in last year's first half.

Net interest expense was $0.1 million in this year's second quarter versus net interest income of $0.5 million in last year's second quarter. Net interest expense for the first six months of this year was $0.3 million versus net interest income of $0.6 million in last year's comparable period. These changes were principally due to lower interest rates on lower amounts of invested cash as compared to last year. Unlike last year, we borrowed under our revolving credit agreement during this year's first six months. We had no amounts outstanding as of August 1, 2009.

Our income tax provision was 40.6% of pretax income from continuing operations in this year's second quarter and this year's first half versus 37.3% in last year's second quarter and 38.4% in last year's first half. Last year's lower rates included the favorable settlements of state income tax audits in the second quarter, which reduced our provision for income taxes by $2.0 million.

Income from continuing operations was $35.2 million, or $.64 per diluted share, in this year's second quarter versus $36.6 million, or $.61 per diluted share, in last year's comparable period. For the first six months, income from continuing operations was $59.6 million or $1.09 per diluted share, this year versus $54.0 million, or $.90 per diluted share, last year. Last year's amounts included the favorable income tax audit settlements of $2.0 million.

Net income for the second quarter was $35.1 million, or $.64 per diluted share, this year versus $36.5 million, or $.61 per diluted share, last year. Last year's second quarter results included post-tax income of $2.0 million, or $0.03 per diluted share, as a result of favorable income tax audit settlements.

Net income for the first six months of this year was $59.4 million, or $1.09 per diluted share, versus $53.7 million, or $.90 per diluted share, last year. These results reflect an 11% increase in net income and a 21% increase in diluted earnings per share versus the prior year. Last year's results also included the post-tax income of $2.0 million, or $0.03 per diluted share, from the previously mentioned income tax audit settlements.

The Company operated 183 clubs on August 1, 2009 versus 178 clubs on August 2, 2008.

Seasonality

Our business, in common with the business of retailers generally, is subject to seasonal influences. Our sales and operating income have typically been highest in the fourth quarter holiday season and lowest in the first quarter of each fiscal year.

Recent Accounting Standards

See Note 14 in Notes to Consolidated Financial Statements for a summary of recently issued accounting standards.

Liquidity and Capital Resources

Net cash provided by operating activities was $135.5 million in the first six months of 2009 versus $131.4 million in last year's comparable period. The increase was driven by higher net income in this year's first six months and changes in certain balance sheet accounts which were affected by the timing of payments. Cash provided by changes in merchandise inventories, net of accounts payable, increased by $7.5 million in the first six months of this year versus an increase of $38.9 million in last year's comparable period.

Average inventory per club increased 3.8% versus last year, due to lower than expected sales in the last two weeks of the second quarter, particularly in edible grocery and consumables. The ratio of accounts payable to merchandise inventories was 70.4% at the end of this year's second quarter versus 73.0% at the end of last year's second quarter. This decrease reflected the unfavorable impact from lower gasoline sales, which have a very fast turning inventory. Excluding gasoline sales, this metric increased slightly compared to last year.

During this year's first six months, we repurchased 1,880,600 shares of our common stock for $55.6 million, all of which was purchased in the first quarter. In last year's first six months, we repurchased 2,357,300 shares of our common stock for $83.2 million. These amounts differ from the stock repurchase amounts in the statement of cash flows due to transactions that had not settled at the beginning of the year. As of August 1, 2009, our remaining repurchase authorization from the Board of Directors was $138.3 million.

We have a $225 million unsecured credit agreement with a group of banks which expires April 27, 2010. The agreement includes a $50 million sub-facility for letters of credit, of which $5.5 million was outstanding at August 1, 2009. We were in compliance with the covenants and other requirements set forth in our credit agreement at August 1, 2009. See Note 11 in Notes to Consolidated Financial Statements for further details of the credit agreement. We expect to refinance our bank credit agreement prior to its expiration.

In addition to the credit agreement, we maintain a $25 million uncommitted credit line for short-term borrowings. We also maintain two separate facilities totaling $82 million for letters of credit, primarily to support the purchase of inventories, of which $38.5 million was outstanding at August 1, 2009. As of August 1, 2009, we also had an outstanding letter of credit in the amount of $5.7 million, which is used to support our self-insurance program for workers' compensation.

There were no borrowings outstanding under our bank credit agreement and our uncommitted credit line at August 1, 2009, January 31, 2009 and August 2, 2008.

During the third quarter of 2002, we established reserves for our liabilities related to leases for three BJ's clubs which closed on November 9, 2002. In 2004 and 2005, we made lump sum payments to settle the leases for two of the three closed clubs. Our reserve of $7.5 million as of August 1, 2009 is based on the present value of our rent liability under the lease for the remaining club, including real estate taxes and common area maintenance charges, reduced by estimated future income from subleasing the property. An annual discount rate of 6% was used to calculate the present value of the obligation.

In 2006, we established reserves for our liabilities related to leases for the two ProFoods clubs, which closed in the fourth quarter. We recorded a charge of $25.7 million to close the ProFoods clubs, which included a charge of $8.8 million for lease obligation costs based on the present value of rent liabilities under the two leases, including estimated real estate taxes and common area maintenance

We believe that the liabilities recorded in the financial statements adequately provide for these lease obligations. However, there can be no assurance that our actual liability for closed store obligations will not differ materially from amounts recorded in the financial statements due to a number of factors, including future economic factors which may affect the ability to successfully sublease, assign or otherwise settle liabilities related to these properties. We consider our maximum reasonably possible undiscounted pretax exposure for our closed store lease obligations to be approximately $16.5 million at August 1, 2009.

Early in 2004 we were notified by credit card issuers that credit and debit card accounts used legitimately at BJ's were subsequently used in fraudulent transactions at non-BJ's locations. In response, we retained a leading computer security firm to conduct a forensic analysis of our information technology systems with a goal of determining whether a breach had in fact occurred. (See Note 9 in Notes to Consolidated Financial Statements for additional information.) We have recorded total charges of $13.0 million to date to establish a reserve for claims seeking reimbursement for fraudulent credit and debit card charges and the cost of replacing cards, monitoring expenses and related fees and expenses. As of August 1, 2009, the balance in the reserve was $3.9 million, which represented our best estimate of the remaining costs and expenses related to this matter at that time. As of August 1, 2009, the amount of outstanding claims, which are primarily from credit card issuing banks, was approximately $13 million. We are unable to predict whether further claims will be asserted. We have contested and will continue to contest the claims made against us and continue to explore our defenses and possible claims against others. The ultimate outcome of this matter could differ from the amounts recorded. While that difference could be material to the results of operations for any affected reporting period, it is not expected to have a material impact on consolidated financial position or liquidity.

Cash and cash equivalents totaled $37.0 million as of August 1, 2009. We believe that our current resources, together with anticipated cash flows from operations, will be sufficient to finance our operations through the term of our credit agreement and any ensuing credit agreement. However, we may from time to time seek to obtain additional financing.

Cautionary Note Regarding Forward-Looking Statements

This report contains a number of "forward-looking statements," including statements regarding planned capital expenditures, planned club openings, expected provision for income taxes, BJ's reserve for credit and debit card claims, lease obligations in connection with closed BJ's and ProFoods clubs or crossdocks, and other information with respect to our plans and strategies, including those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "estimates," "expects" and similar expressions are intended to identify forward-looking

Any forward-looking statements represent our estimates only as of the day this quarterly report was first filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.