BJ’s Wholesale (BJ) Strong AprQ Results Demonstrate A Growing Demand For Bargains
3:20 pm Thursday, May 19th, 2022
As the market turned cold toward BJ’s Wholesale (BJ) after Walmart (WMT) and Target (TGT) signaled weakness in the retail sector with their considerable Q1 (Apr) earnings misses earlier in the week, it may have overlooked a critical metric. That is, Sam’s Club comps jumped +10.2% in AprQ and +17.4% on a two-year basis, while Walmart US comps grew just +3.0%. This may not have done much to keep shares of WMT from tanking, but it was a bullish sign for similar warehouse club BJ’s ahead of its AprQ report today.
BJ’s did not disappoint. The company posted same-store sales growth, excluding gasoline, of +4.0% in Q1 (Apr), giving it a two-year comp of +26.1%; delivered upside on its top and bottom lines; and reaffirmed its FY23 earnings guidance. The solid results posted by BJ’s and Sam’s Club even while retail, broadly, has gotten crushed by strong inflationary forces set up Costco (COST) nicely ahead of its AprQ earnings report, scheduled for May 26.
Why are warehouse clubs performing so strongly while the rest of retail is struggling? As seen in TJX’s (TJX) AprQ results, discount retailers are attracting shoppers’ interests as households tighten budgets due to inflation. Warehouse clubs like BJ’s and Sam’s Club are no exception to this trend. This shows up in BJ’s membership count reaching all-time records in the quarter, eclipsing 6.5 mln, a 12% jump yr/yr.
BJ’s also sells gasoline at discounts relative to traditional gas stations, much like Sam’s Club and COST. As gas prices shot to record highs, BJ’s continued to see increases in comp gallons, up 23% yr/yr and 51% on a two-year stack in Q1.
BJ’s success in navigating the strong inflationary environment is also why it could reiterate its FY23 earnings guidance. The company continues to expect flat EPS growth yr/yr, implying earnings of $3.25.
Overall, BJ’s AprQ results demonstrated that demand for bargains is growing as inflation erodes consumers’ purchasing power. As warehouse clubs often boast deals that are not advertised online, consumers are incentivized to take frequent trips to the store to seek out the best values. Also, as gasoline prices surge, these clubs’ discounted gas prices are helping drive an increase in memberships. Lastly, one key advantage BJ has over its rivals is its higher assortment of grocery products. As more individuals look to eat at home, BJ’s has benefited enormously, posting +15% comps in its food business in Q1. These factors bode well for BJ’s going forward.
