BJ's (BJ)

Membership-only discount retailer BJ’s Wholesale Club (NYSE:BJ) missed Wall Street’s revenue expectations in Q2 CY2025 as sales rose 3.4% year on year to $5.38 billion. Its non-GAAP profit of $1.14 per share was 4.4% above analysts’ consensus estimates.

Company Overview

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.

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.

Competitors that offer groceries and/or other general merchandise in large-format stores include Costco (NASDAQ:COST), Walmart (NYSE:WMT), and Kroger (NYSE:KR).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $20.91 billion in revenue over the past 12 months, BJ's is one of the larger companies in the consumer retail industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because there are only a finite number of places to build new stores, making it harder to find incremental growth. To expand meaningfully, BJ's likely needs to tweak its prices or enter new markets.

As you can see below, BJ’s 8.1% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre as it barely increased sales at existing, established locations.

This quarter, BJ’s revenue grew by 3.4% year on year to $5.38 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 7% over the next 12 months, similar to its six-year rate. We still think its growth trajectory is attractive given its scale and suggests the market is baking in success for its products.

Number of Stores

BJ's sported 255 locations in the latest quarter. Over the last two years, it has opened new stores quickly, averaging 3.4% annual growth. This was faster than the broader consumer retail sector.

When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.

Same-Store Sales

A company's store base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.

BJ’s demand within its existing locations has been relatively stable over the last two years but was below most retailers. On average, the company’s same-store sales have grown by 1.5% per year. This performance suggests it should consider improving its foot traffic and efficiency before expanding its store base.

In the latest quarter, BJ’s year on year same-store sales were flat. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if BJ's can reaccelerate growth.

Gross profit margins are an important measure of a retailer’s pricing power, product differentiation, and negotiating leverage.

BJ's has bad unit economics for a retailer, signaling it operates in a competitive market and lacks pricing power because its inventory is sold in many places. As you can see below, it averaged a 18.4% gross margin over the last two years.

Non-discretionary retailers, however, must be viewed through a different lens because they compete on the lowest price, sell products easily found elsewhere, and have high transportation costs to move goods. These dynamics lead to structurally lower gross margins, so the best metrics to assess them are free cash flow margin, operating leverage, and profit volatility, which account for their scale advantages and non-cyclical demand.

In Q2, BJ's produced a 18.7% gross profit margin, in line with the same quarter last year and exceeding analysts’ estimates by 1.1%. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting it strives to keep prices low for customers and has stable input costs (such as labor and freight expenses to transport goods).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

BJ’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 3.9% over the last two years. This profitability was lousy for a consumer retail business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, BJ’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, BJ's generated an operating margin profit margin of 4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

BJ’s EPS grew at a solid 19.8% compounded annual growth rate over the last six years, higher than its 8.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q2, BJ's reported adjusted EPS of $1.14, up from $1.09 in the same quarter last year. This print beat analysts’ estimates by 4.4%. Over the next 12 months, Wall Street expects BJ’s full-year EPS of $4.39 to grow 1.5%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

BJ's has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.6%, subpar for a consumer retail business.

BJ’s free cash flow clocked in at $87.29 million in Q2, equivalent to a 1.6% margin. This cash profitability was in line with the comparable period last year and its two-year average.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

BJ's historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 13.9%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

BJ's reported $47.27 million of cash and $2.64 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.12 billion of EBITDA over the last 12 months, we view BJ’s 2.3× net-debt-to-EBITDA ratio as safe. We also see its $24.49 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing BJ's beat analysts’ EBITDA expectations this quarter. We were also happy its gross margin narrowly outperformed Wall Street’s estimates. On the other hand, its revenue missed and its full-year EPS guidance fell slightly short of Wall Street’s estimates. Zooming out, we think this was a mixed quarter. The stock remained flat at $106.50 immediately following the results.

Updated: November 8, 2025 at 9:40 PM EST

Are you wondering whether to buy BJ's or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

BJ's isn’t a terrible business, but it doesn’t pass our bar. To begin with, its revenue growth was a little slower over the last six years, and analysts expect its demand to deteriorate over the next 12 months. And while its expanding store base shows it’s playing offense to grow its brand, the downside is its gross margins make it more challenging to reach positive operating profits compared to other consumer retail businesses. On top of that, its operating margins reveal poor profitability compared to other retailers.

BJ’s P/E ratio based on the next 12 months is 20.6x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $115.15 on the company (compared to the current share price of $91.41).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.