Goldman Sachs Raises BJ's Wholesale Estimates Following December Sales Results

Following BJ's Wholesale BJ December sales results and announcement of strategic actions, Goldman Sachs is raising its 2011/2012 EPS estimates to $2.76/$3.02 from $2.74/$3.00. While December sales fell short of expectations and consensus estimates, Goldman believes management's actions to close underperforming stores and restructure the home office and certain field operations will more than offset any shortfall from the current month. Goldman is adjusting its estimates to incorporate the $4 mn-$5 mn in pre-tax operating losses, which equates to $0.04 EPS, as well as a lower comp estimate. The management's actions are a step in the right direction. However, the weaker-than-expected underlying fundamentals may continue to weigh on the stock as the company struggles to drive improvements in traffic and ticket. The combination of uncertain fundamentals and elevated valuation due to takeover speculation keeps Goldman Neutral rated on BJ. Goldman Sachs has a $47 PT on BJ BJ closed Wednesday at $45.96