BJ's Wholesale Club Tops Earnings Estimates; Well-Positioned in Near and Long Term

© Reuters. BJ's Wholesale Club (BJ) Tops Earnings Estimates - Well Positioned in Near and Long-term

By Sam Boughedda

Shares of BJ's Wholesale Club (NYSE:BJ) rallied in early Thursday trading after the company posted earnings before the bell, with earnings and revenue trouncing expectations.

The membership-only retailer reported second quarter earnings of $1.06, $0.27 better than the analyst estimate of $0.79. Revenue for the quarter came in at $5.01 billion versus the consensus estimate of $4.62 billion.

In addition, total comparable club sales increased by 19.8% year-over-year, while membership fee income increased by 11.3% year-over-year to $98.8 million.

"Our strong results in the second quarter were led by gains in traffic and market share as we continued to deliver tremendous value across virtually every aspect of our business," said Bob Eddy, President and Chief Executive Officer, BJ's Wholesale Club. "Our relentless focus on investing in our long-term initiatives has put us in a place to capitalize on current trends and deliver this strong performance."

Looking ahead, the company sees fiscal full-year earnings per share between $3.50 and $3.60 per share versus the consensus of $3.33. In addition, they expect 2022 comparable club sales growth to be in the 4% to 5% range, up from the original guidance of low single digit. The expected increase excludes the impact of gasoline sales.

Following the report, a BofA analyst upgraded BJ's Wholesale from Neutral to Buy, increasing the firm's price target on the stock to $83 from $72.

"We upgrade BJ to Buy from Neutral, and raise our PO to $83 (was $72} to reflect 22x (was 19-20x) our new $3.75 F24E EPS. We view 22x as fair given continued membership strength, BJ's attractive value proposition in a highly inflationary environment, and recent strong results," said the analyst. "BJ's saw growth in both Grocery, Perishables and Sundries (+8%y/y) as well as General Merchandise & Services (*4% y/y). Gas contributed positively to profits in the quarter while merchandise margins ex-gas decreased -50bps y/y given pressure from increased freight costs as well as investments in inflationary categories and markdowns in general merchandise inventory."

The analyst concluded that they view BJ's as well positioned in the near term and long term.