Citi Comments On BJ's Wholesale Following Recent Earnings Report

Citi was impressed with BJ's Wholesale BJ 4Q10 EPS beat, which was driven by better-than-expected expense control. Looking ahead, Citi believes club retailers such as BJ are well-positioned in the rising gas price environment to benefit from increased traffic and sales. As a result, it believes there could be upside to BJ's 2011 SSS guidance of 2.5 to 4.5%. Citi reiterates its Hold rating for BJ and lowers its PT from $53 to $52. BJ reported 4Q10 EPS of $0.95, above Citi's estimate, consensus, and guidance of $0.92, and vs. $0.94 LY. Comp club sales increased +3.8%, vs. guidance of 2.5 to 4.5%. The upside vs. Citi's estimate was driven by less SG&A expense deleverage than expected. Citi is reducing its price target for BJ to $52, down from $53 previously, to reflect the updated probability-weighted valuation, which is based on fundamental valuation for BJ of $40 and a takeout valuation of $57. BJ closed Wednesday at $49.66