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Bull of the Day: BJ's Wholesale Club (BJ)

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BJ’s Wholesale Club (BJ - Free Report) is a membership-only retail club chain that operates primarily on the East Coast, as well as in Ohio and Michigan. BJ’s offers members a variety of name-brand products at discount wholesale prices across many categories like grocery, household, pet, toys, and more.

Q3 Earnings Recap

BJ’s revenue grew 14.3% year-over-year to $4.26 billion; actual product sales increased 14.4% while membership fees rose 7.7% over the prior-year period. "Membership size and quality continue to improve; first-year renewal rates remain at historic levels,” said BJ’s in the earnings press release.

Earnings came in at $0.92 per share, showing healthy improvement over Q3 2020 and easily beating Wall Street’s projections of $0.81 per share.

Comparable store sales (excluding gasoline sales) gained an impressive 5.7%, with digital sales spiking 44% year-over-year.

Cash flow remains strong too. Net cash provided by operating activities hit $173.9 million and free cash flow was $99.2 million for the quarter. BJ’s board also authorized a $500 million share repurchase program.

Notably, supply chain challenges weren’t too much of a factor for BJ’s in Q3. Gross profit margin did drop by 0.2 percentage points, but the wholesaler was able to offset that slump by selling more high-margin products like consumer electronics.

BJ Breaks Out

BJ's Wholesale Club Holdings, Inc. Price and Consensus


Year-to-date, shares of BJ have soared over 81%, which is above the S&P 500’s 25.2% increase. Earnings estimates have been rising too, and BJ is a Zacks Rank #1 (Strong Buy) as of this writing.

For fiscal 2021, seven analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 26 cents to $3.18 per share. Earnings are expected to grow about 3% compared to the prior year period. Fiscal 2022 looks strong too; seven analysts have upped their outlook and our consensus estimate has climbed 30 cents to $3.46 per share.

Looking ahead, BJ’s management declined to offer guidance for the holiday quarter, citing “[continued] external factors and uncertainties in the market.”

But its improving membership renewal rates is a great sign as BJ’s looks to finish 2021 on a strong note and continue to expand its footprint. The market share BJ’s gained throughout the pandemic is a good sign that there’s still growing demand for wholesale retail.

If you’re an investor searching for a retail sector stock to add to your portfolio, make sure to keep BJ on your shortlist.

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