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Here's How BJ's Wholesale Club (BJ) Looks Going Into 2021

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In this ultra-competitive retail environment, BJ's Wholesale Club Holdings, Inc. (BJ - Free Report) has made multiple changes to its business model to adapt and stay relevant. Notably, this Westborough, MA-based company looks well poised to enter 2021, given its sound fundamentals and growth efforts. Impressively, shares of this operator of warehouse clubs have climbed 68.5% so far in the year against the industry’s decline of 9.5%.

Strategic Endeavors to Drive Momentum

BJ's Wholesale Club’s focus on simplifying assortments, expanding into high-demand categories and building own-brands portfolio bodes well. The company also remains committed toward enhancing omni-channel capabilities and providing value to customers. Cumulatively, these endeavors have been contributing to growth in membership signups and renewals, resulting in higher membership fee income, higher average members per club and decent comparable club sales growth.

Comparable club sales during third-quarter fiscal 2020 rose 14.1%, following an increase of 17.2% and 19.9% in the second and first quarter, respectively. Excluding the impact of gasoline sales, comparable club sales surged 18.5% during the third quarter. Impressive comparable sales growth of 19% in the grocery division contributed to this upbeat performance. Notably, the grocery division gained from increased demand for fresh meat, frozen meals, fresh produce, beverages, salty snacks, paper products, cleaning supplies, and health and beauty items, owing to the coronavirus outbreak.

We believe that the demand for essential products will remain high as more and more people prefer to dine at home. No wonder, BJ's Wholesale Club, which carries Zacks Rank #2 (Buy), looks well poised to capitalize on this growing trend.



The company has added new vendors to strengthen supply chain in food, paper and cleaning supplies, and participate in new personal protective equipment categories. Additionally, general merchandise and services division registered comparable sales growth of 13% driven by strong sales of TVs, computer equipment, and other home related categories such as indoor furniture and small appliances.

The coronavirus pandemic and the resultant stay-at-home trends have led to an increase in online shopping. Clearly, BJ's Wholesale Club has been sparing no effort to bolster omni-channel operations and ramp up delivery services. The company has been directing resources toward expanding digital capabilities in order to better engage with members and provide them a convenient way to shop, including same-day delivery, curbside pick-up and buy-online, pickup-in-club.

We note that during the third quarter digitally-enabled sales surged 200%, and added 4 percentage points to comparable club sales, excluding gasoline sales. This followed an increase of 300% and 350% in the second and first quarter, respectively.

Bottom Line

In spite of lingering coronavirus woes, BJ's Wholesale Club looks well poised for growth on account of its better price management, focus on grocery offerings, ongoing investments in omni-channel capabilities and surge in membership.

3 More Key Picks

Grocery Outlet (GO - Free Report) has a long-term earnings growth rate of 14.7% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Target (TGT - Free Report) has a long-term earnings growth rate of 8.5% and a Zacks Rank #2.

Sprouts Farmers Market (SFM - Free Report) , a Zacks Rank #2 stock, has a long-term earnings growth rate of 9.2%.

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