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Shares of BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) rose 4% during the trading session on Aug 19, following the company’s better-than-expected second-quarter fiscal 2021 results, wherein both the top and the bottom lines improved year over year. Surprisingly, this operator of membership warehouse clubs registered comparable sales growth during the quarter. The company also continued to witness decent increase in digitally-enabled sales.
Solid execution of strategies, outstanding membership results, gain in market share and elevated consumer spending trends contributed to the company’s overall performance. Shares of this Zacks rank #2 (Buy) company have surged 18.3% in the past three months against the industry’s decline of 8.4%.
Q2 Insights
BJ’s Wholesale Club reported adjusted earnings of 82 cents a share that surpassed the Zacks Consensus Estimate of 65 cents. The quarterly earnings increased 6.5% from 77 cents posted in the year-ago quarter. Top-line growth and lower interest expenses fueled bottom-line performance in the said period.
This Westborough, MA-based company generated total revenues of $4,177.2 million that rose 5.6% from the year-ago quarter’s levels and surpassed the Zacks Consensus Estimate of $3,855 million. Net sales moved up 5.6% to $4,088.4 million, while membership fee income jumped 7.6% to $88.8 million. The company notified that membership grew 3% during the quarter, while own brands penetration increased to 23% of merchandise sales.
Comparable club sales during the quarter under review rose 4%, reflecting two-year stacked comp sales of 21.2%. Excluding the impact of gasoline sales, comparable club sales declined 3.4% during the quarter, reflecting two-year stacked comp sales of 20.8%.
We note that digitally-enabled sales rose 4% during the quarter, as members continue to take benefit of services such as curbside pickup. On a two-year stacked basis, digitally-enabled sales soared 304% and drove nearly four percentage points of merchandise comp. On a two-year stacked basis, the company witnessed sturdy growth in all its digital channels, especially BOPIC, curbside pickup and same-day delivery.
BJs Wholesale Club Holdings, Inc. Price, Consensus and EPS Surprise
During the quarter, gross profit rose marginally by 0.9% to $763.5 million. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, expanded 30 basis points from the year-ago quarter’s level. The upside was aided by improved private label penetration and the mix of general merchandise sales, partly offset by higher freight costs and price investments in inflationary categories.
Operating income increased slightly by 0.1% to $163.8 million, while operating margin shrunk 20 basis points to 3.9%. We note that adjusted EBITDA increased 1.5% to $220.1 million during the quarter, reflecting continued margin expansion and disciplined cost management.
SG&A expenses rose 1.2% to $ $598.1 million from the year-ago quarter, driven by a team member recognition bonus of about $8 million.
Key Financial Details & Other Updates
BJ’s Wholesale Club ended the second quarter with cash and cash equivalents of $42.4 million. Long-term debt amounted to $747.7 million, while stockholders’ equity stood $488.4 million. The company had paid down approximately $360 million in debt in the first half of fiscal 2021.
Net cash provided by operating activities during the quarter was $310.3 million, while free cash flow amounted to $239.7 million. As part of its share repurchase program, the company bought back $49.6 million worth of shares in the second quarter.
During the second quarter, the company opened one new club in Seabrook, NH. It plans to open new locations in Port Charlotte, FL; Commack, NY; Lansing, MI; and two clubs in Pittsburgh, PA in the final quarter. The company intends to open 10 or more new clubs in fiscal 2022. With respect to gas stations, the company plans to open nine this fiscal year, and a dozen or more in fiscal 2022.
Outlook
Management stated that sturdy membership trends, assortment initiatives, enhanced digital capabilities and robust real estate pipeline would help the company to sustain stellar growth. BJ’s Wholesale Club indicated that the current view for the back half sales trend has improved from its initial expectations, thanks to tailwinds such as enhanced child tax credit payments and rising at home consumption. However, it cautioned about margin pressures from inflation as well as freight costs, along with meaningful investments in labor and incremental COVID related safety and sanitation expenses.
The company now anticipates low to mid-single-digit decline in comparable sales for the remaining part of the fiscal year. The current estimate is based on robust membership results and the improving trend in food at home consumption when compared with the company’s expectations at the end of the first quarter. The company had earlier guided comparable sales to decline in the 10%-range for the remaining part of the year.
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BJ's Wholesale Club (BJ) Q2 Earnings Beat, Comps Rise 4% Y/Y
Shares of BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) rose 4% during the trading session on Aug 19, following the company’s better-than-expected second-quarter fiscal 2021 results, wherein both the top and the bottom lines improved year over year. Surprisingly, this operator of membership warehouse clubs registered comparable sales growth during the quarter. The company also continued to witness decent increase in digitally-enabled sales.
Solid execution of strategies, outstanding membership results, gain in market share and elevated consumer spending trends contributed to the company’s overall performance. Shares of this Zacks rank #2 (Buy) company have surged 18.3% in the past three months against the industry’s decline of 8.4%.
Q2 Insights
BJ’s Wholesale Club reported adjusted earnings of 82 cents a share that surpassed the Zacks Consensus Estimate of 65 cents. The quarterly earnings increased 6.5% from 77 cents posted in the year-ago quarter. Top-line growth and lower interest expenses fueled bottom-line performance in the said period.
This Westborough, MA-based company generated total revenues of $4,177.2 million that rose 5.6% from the year-ago quarter’s levels and surpassed the Zacks Consensus Estimate of $3,855 million. Net sales moved up 5.6% to $4,088.4 million, while membership fee income jumped 7.6% to $88.8 million. The company notified that membership grew 3% during the quarter, while own brands penetration increased to 23% of merchandise sales.
Comparable club sales during the quarter under review rose 4%, reflecting two-year stacked comp sales of 21.2%. Excluding the impact of gasoline sales, comparable club sales declined 3.4% during the quarter, reflecting two-year stacked comp sales of 20.8%.
We note that digitally-enabled sales rose 4% during the quarter, as members continue to take benefit of services such as curbside pickup. On a two-year stacked basis, digitally-enabled sales soared 304% and drove nearly four percentage points of merchandise comp. On a two-year stacked basis, the company witnessed sturdy growth in all its digital channels, especially BOPIC, curbside pickup and same-day delivery.
BJs Wholesale Club Holdings, Inc. Price, Consensus and EPS Surprise
BJs Wholesale Club Holdings, Inc. price-consensus-eps-surprise-chart | BJs Wholesale Club Holdings, Inc. Quote
A Look at Margins
During the quarter, gross profit rose marginally by 0.9% to $763.5 million. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, expanded 30 basis points from the year-ago quarter’s level. The upside was aided by improved private label penetration and the mix of general merchandise sales, partly offset by higher freight costs and price investments in inflationary categories.
Operating income increased slightly by 0.1% to $163.8 million, while operating margin shrunk 20 basis points to 3.9%. We note that adjusted EBITDA increased 1.5% to $220.1 million during the quarter, reflecting continued margin expansion and disciplined cost management.
SG&A expenses rose 1.2% to $ $598.1 million from the year-ago quarter, driven by a team member recognition bonus of about $8 million.
Key Financial Details & Other Updates
BJ’s Wholesale Club ended the second quarter with cash and cash equivalents of $42.4 million. Long-term debt amounted to $747.7 million, while stockholders’ equity stood $488.4 million. The company had paid down approximately $360 million in debt in the first half of fiscal 2021.
Net cash provided by operating activities during the quarter was $310.3 million, while free cash flow amounted to $239.7 million. As part of its share repurchase program, the company bought back $49.6 million worth of shares in the second quarter.
During the second quarter, the company opened one new club in Seabrook, NH. It plans to open new locations in Port Charlotte, FL; Commack, NY; Lansing, MI; and two clubs in Pittsburgh, PA in the final quarter. The company intends to open 10 or more new clubs in fiscal 2022. With respect to gas stations, the company plans to open nine this fiscal year, and a dozen or more in fiscal 2022.
Outlook
Management stated that sturdy membership trends, assortment initiatives, enhanced digital capabilities and robust real estate pipeline would help the company to sustain stellar growth. BJ’s Wholesale Club indicated that the current view for the back half sales trend has improved from its initial expectations, thanks to tailwinds such as enhanced child tax credit payments and rising at home consumption. However, it cautioned about margin pressures from inflation as well as freight costs, along with meaningful investments in labor and incremental COVID related safety and sanitation expenses.
The company now anticipates low to mid-single-digit decline in comparable sales for the remaining part of the fiscal year. The current estimate is based on robust membership results and the improving trend in food at home consumption when compared with the company’s expectations at the end of the first quarter. The company had earlier guided comparable sales to decline in the 10%-range for the remaining part of the year.
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