BJ's Wholesale Positioned As One Of Few Big-box Retailers With Long-Term Growth Potential – Analyst Highlights Membership, Sales, And Digital Performance

DA Davidson analyst Michael Baker reiterated the Buy rating on BJ’s Wholesale Club Holdings, Inc. BJ, raising the price forecast to $110 from $95.

Yesterday, the company reported third-quarter adjusted earnings per share of $1.18, beating the street view of 91 cents. Quarterly revenues of $5.10 billion were in line with the analyst consensus.

BJ’s Wholesale Club expects fourth-quarter adjusted EPS to be between $0.78 and $0.88. For FY2024, adjusted EPS is forecasted at $3.90 – $4.00, up from previous guidance for a low end of $3.75 – $4.00 and against the consensus estimate of $3.85.

The analyst notes that BJ has had another strong quarter, showing improvements in key areas like membership, sales, and digital performance.

BJ’s Wholesale Club expects fourth quarter comparable club sales, excluding gasoline, to rise 2.5% – 3.0% year-over-year.

With plenty of room to grow its store base, BJ’s is positioned as one of the rare long-term square footage growth stories in the big-box retail sector. Recent successes also allow BJ’s to raise fees, which, while benefiting customers, will ultimately be advantageous for shareholders, the analyst writes.

The analyst highlights BJ’s strategy to compete with Costco Wholesale by focusing on differentiating itself, especially in the grocery and fresh produce areas.

BJ’s grocery sales make up 77% of its total, compared to Costco’s 54%. Per Bake, BJ’s aims to replace weekly grocery trips, while Costco is more about stock-up shopping.

Their “Fresh 2.0” program, launched 18 months ago, improves perishable and produce offerings through supply chain investments, better vendor relations, and enhanced in-store experiences.

The program has shown positive results, with strong produce sales and customers spending more, leading to significantly higher annual spending, the analyst adds.

Price Action: BJ shares are trading higher by 3.78% to $96.30 at last check Friday.

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