Is BJ’s Wholesale Club stock poised for further growth?

BJ

BJs Wholesale Club

$85.63

-1.16 (-1.34%)

(As of: 02.07.2024 ET)

52-week range

$62.05

▼

$90.43

P/E

22.24

Target price

$82.06

BJ’s Wholesale Club Holding Inc. NYSE: BJ is a members-only warehouse club on the East Coast of the United States. The company operates 244 clubs and 176 BJ’s Gas stores in 20 states from Maine to Florida. Its stores sell groceries, electronics, general merchandise, patio and garden supplies, auto accessories and gasoline. It also has private label brands, including Wellsley Farms and Berkeley Jenson. Its shares recently hit an all-time high of $90.43.

BJ’s operates in the retail/wholesale sector and competes with warehouse clubs and retailers such as Costco Wholesale Co. NASDAQ: COSTS, Walmart Inc. NYSE: WMTAnd Target Co. NYSE: TGT.

BJ’s Wholesale Clubs vs. Costco Department Stores

The obvious comparison between BJ’s and market leader Costco is hard to avoid. An average BJ’s store is about 10,000 square feet, while a Costco store is about 13,000 square feet. Size varies by geographic location. BJ’s also has smaller clubs called BJ’s Market, which are about 4,000 square feet. BJ’s operates 244 clubs in the U.S., while Costco operates over 800 locations worldwide.

Does BJ’s smaller size mean more potential than Costco?

BJ’s carries over 7,000 stock-keeping units (SKUs) compared to Costco’s around 4,000. Most grocery stores carry up to 30,000 SKUs. Costco customers tend to buy in bulk, and Costco ships there. BJ’s stores are smaller and focus on inexpensive and perishable goods. They tend to be less crowded and overwhelmingly large than Costco’s warehouses. Costco has a market cap of $376.8 billion compared to BJ’s tiny market cap of $11.66 billion. But that could mean more upside or room for growth for BJ’s stock, which trades at 22.47 times forward earnings compared to 53.19 for Costco.

BJ stock could collapse due to a rising wedge pattern

The daily candlestick chart for BJ shows a rising wedge pattern consisting of an upper trendline of higher highs and a lower trendline of higher lows that converge. The breakdown will occur if the stock falls below the lower trendline at $88.00, which will be a test. The daily relative strength index (RSI) has dropped choppily to the 56 band after failing to break above the 70 band. Pullback support levels are at $83.71, $80.42, $74.44, and $71.81.

BJ’s reports modest Q1 2024 earnings report

BJ reported first-quarter 2024 earnings per share of 85 cents versus consensus estimates of 83 cents, up 2 cents. Net income fell to $111 million from $116.1 million in the year-ago period. Adjusted EBITDA fell to $236.4 million from $251.5 million in the year-ago period.

Revenue increased 4.1% year-over-year to $4.92 billion, beating analyst estimates of $4.86 billion. Comparable club sales increased 1.6% year-over-year. Comparable club sales excluding gasoline sales increased 0.6% year-over-year, driven by robust traffic and unit volume growth. Digitally enabled comparable sales increased 21% year-over-year. Membership fee revenue was excellent at 8.6% year-over-year at $111.4 million. Gross profit margin on merchandise decreased 50 basis points year-over-year. BJ’s opened a new club and a new gas station during the quarter.

BJ’s Wholesale reiterated its full-year 2024 EPS forecast of $3.75 to $4.00, compared to the analyst consensus estimate of $3.93.

BJ CEO optimistic about membership and market share growth

BJ’s Wholesale Club CEO Bob Eddy was optimistic during the conference call, highlighting robust growth in memberships and market share despite inflation. The company plans to open 12 new BJ’s locations in 2024. Strong customer traffic at BJ’s stores and gas stations contributed 3% to the quarter. Inflation remained flat, but managed to increase unit volumes in the perishables, miscellaneous and grocery categories, increasing comparable units. The company gained market share in units and dollars. Comparable growth in the above categories increased by over 1% in the quarter.

Eddy commented: “Consumers remain discerning in their purchases and we have also seen that members are increasingly waiting to purchase high-priced seasonal items such as outdoor furniture and air conditioning units precisely when the weather changes, rather than waiting for it. Providing members with good value for money, general merchandise is critical to our model and we continue to make excellent progress in our transformation efforts.”

BJ’s Wholesale analyst ratings and price targets are at MarketBeat.

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