BJ's Wholesale Club Beats On Earnings, But Revenue Misses Reflecting Shift In Consumer Behavior

BJ's Wholesale Club Holdings Inc BJ reported a second-quarter FY23 sales decline of 2.9% year-on-year to $4.96 billion, missing the analyst consensus of $5.15 billion.

Total comparable club sales decreased by 5.3%. Comparable club sales, excluding gasoline sales, increased by 1.1%.

Membership fee income increased by 5% to $103.7 million. Digitally enabled comparable sales climbed 15% Y/Y.

Gross profit rose 4.3% Y/Y to $896.8 million with a margin of 18.4%. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased by 90 basis points Y/Y.

Operating margin was 4%, and operating income for the quarter fell 1.3% to $200.3 million. Adjusted EBITDA of $268.8 million decreased 1.8% Y/Y.

Adjusted EPS of $0.97 beat the analyst consensus of $0.90.

BJ's Wholesale Club held $26.2 million in cash and equivalents as of July 29, 2023. Operating cash flow for six months totaled $269.5 million.

Under its existing share repurchase program, the company repurchased 715,122 shares of common stock, totaling $44.6 million in Q2.

"Our strong performance in the second quarter reflects our continued gains in membership, traffic and market share, driven by the great value that we provide our members every day," said Chairman and CEO Bob Eddy.

Outlook: BJ's Wholesale expects FY23 EPS of $3.80-$3.92 versus the consensus of $3.87. The company previously expected EPS to remain approximately flat year-over-year, including the 53rd-week benefit of low-teens cents per share.

BJ currently expects FY23 comparable club sales growth, excluding the impact of gasoline sales, to grow 2% Y/Y.

BJ expects membership fee income to increase approximately 5% and merchandise gross margins to improve by 50 basis points year-over-year.

Price Action: BJ shares traded lower by 2.64% at $67.90 in premarket on the last check Tuesday.