Membership-only discount retailer BJ’s Wholesale Club (NYSE:BJ) reported Q2 CY2024 results exceeding Wall Street analysts’ expectations, with revenue up 4.9% year on year to $5.21 billion. It made a non-GAAP profit of $1.09 per share, improving from its profit of $0.97 per share in the same quarter last year.
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BJ's (BJ) Q2 CY2024 Highlights:
- Revenue: $5.21 billion vs analyst estimates of $5.15 billion (1% beat)
- EPS (non-GAAP): $1.09 vs analyst estimates of $1.01 (8.4% beat)
- EPS (non-GAAP) guidance for the full year is $3.88 at the midpoint, missing analyst estimates by 1.6%
- Gross Margin (GAAP): 18.4%, in line with the same quarter last year
- EBITDA Margin: 5.4%, in line with the same quarter last year
- Free Cash Flow Margin: 1.7%, similar to the same quarter last year
- Locations: 244 at quarter end, up from 238 in the same quarter last year
- Same-Store Sales rose 3.1% year on year (1.1% in the same quarter last year)
- Market Capitalization: $11.63 billion
“Our second quarter was marked by robust membership, accelerating traffic and unit growth, and a fast-tracking digital business, which led to strong performance in the quarter. This was our tenth consecutive quarter of traffic growth. We are driving healthy membership expansion across both existing and new clubs. Our compelling value proposition is resonating with our members and we believe our results demonstrate the meaningful progress we are making on our long term strategic initiatives,” said Bob Eddy, Chairman and Chief Executive Officer, BJ’s Wholesale Club.
Appealing to the budget-conscious individual shopping for a household, BJ’s Wholesale Club (NYSE:BJ) is a membership-only retail chain that sells groceries, appliances, electronics, and household items, often in bulk quantities.
Large-format Grocery & General Merchandise Retailer
Big-box retailers operate large stores that sell groceries and general merchandise at highly competitive prices. Because of their scale and resulting purchasing power, these big-box retailers–with annual sales in the tens to hundreds of billions of dollars–are able to get attractive volume discounts and sell at often the lowest prices. While e-commerce is a threat, these retailers have been able to weather the storm by either providing a unique in-store shopping experience or by reinvesting their hefty profits into omnichannel investments.
Sales Growth
BJ's is one of the larger companies in the consumer retail industry and benefits from economies of scale, enabling it to gain more leverage on fixed costs and offer consumers lower prices.
As you can see below, the company’s annualized revenue growth rate of 9.2% over the last five years was mediocre as it opened new stores and grew sales at existing, established stores.
This quarter, BJ's reported decent year-on-year revenue growth of 4.9%, and its $5.21 billion in revenue topped Wall Street’s estimates by 1%. Looking ahead, Wall Street expects sales to grow 4.7% over the next 12 months, a deceleration from this quarter.
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Same-Store Sales
Same-store sales growth is an important metric that tracks demand for a retailer’s established brick-and-mortar stores and e-commerce platform.
BJ’s demand within its existing stores has generally risen over the last two years but lagged behind the broader consumer retail sector. On average, the company’s same-store sales have grown by 3.3% year on year. With positive same-store sales growth amid an increasing physical footprint of stores, BJ's is reaching more customers and growing sales.
In the latest quarter, BJ’s same-store sales rose 3.1% year on year. This growth was an acceleration from the 1.1% year-on-year increase it posted 12 months ago, which is always an encouraging sign.
Key Takeaways from BJ’s Q2 Results
It was good to see BJ's beat analysts’ EPS expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its full-year earnings forecast was underwhelming. Zooming out, we think this was a decent quarter, but the guidance is dragging down shares. The stock traded down 2.9% to $85.07 immediately after reporting.
So should you invest in BJ's right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.