BJ's (BJ)

Membership-only discount retailer BJ’s Wholesale Club (NYSE:BJ) met Wall Streets revenue expectations in Q3 CY2025, with sales up 4.9% year on year to $5.35 billion. Its non-GAAP profit of $1.16 per share was 6.6% 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 is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

With $21.16 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 is only so much real estate to build new stores, placing a ceiling on its growth. To accelerate sales, BJ's likely needs to optimize its pricing or lean into international expansion.

As you can see below, BJ’s sales grew at a mediocre 8.3% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it barely increased sales at existing, established locations.

This quarter, BJ's grew its revenue by 4.9% year on year, and its $5.35 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6% over the next 12 months, a slight deceleration versus the last six years. We still think its growth trajectory is attractive given its scale and indicates the market is baking in success for its products.

Number of Stores

The number of stores a retailer operates is a critical driver of how quickly company-level sales can grow.

BJ's sported 257 locations in the latest quarter. Over the last two years, it has opened new stores at a rapid clip by averaging 3.6% annual growth, among the fastest in the 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 gives us insight into this topic because it measures organic growth for a retailer's e-commerce platform and brick-and-mortar shops that have existed 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 1.6% 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 same-store sales rose 1.1% year on year. This performance was more or less in line with its historical levels.

At StockStory, we prefer high gross margin businesses because they indicate pricing power or differentiated products, giving the company a chance to generate higher operating profits.

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 18.5% 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.

BJ’s gross profit margin came in at 19% this quarter, in line with the same quarter last year. 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).

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.

In Q3, BJ's generated an operating margin profit margin of 4.1%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

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 1.5%, subpar for a consumer retail business.

BJ's broke even from a free cash flow perspective in Q3. This cash profitability was in line with the comparable period last year but below its two-year average. In a silo, this isn’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

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 13.7%, somewhat low compared to the best consumer retail companies that consistently pump out 25%+.

BJ's reported $45.12 million of cash and $2.70 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 $1.11 billion of EBITDA over the last 12 months, we view BJ’s 2.4× net-debt-to-EBITDA ratio as safe. We also see its $22.37 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.

It was encouraging to see BJ's beat analysts’ EPS expectations this quarter despite in-line revenue. That the company slightly raised full-year EPS guidance was also a good sign. Overall, this print had some key positives. The stock remained flat at $91.06 immediately following the results.

Updated: December 4, 2025 at 9:39 PM EST

When considering an investment in BJ's, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

BJ's isn’t a terrible business, but it isn’t one of our picks. First off, its revenue growth was a little slower over the last three years. 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 20.1x. 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 $109.26 on the company (compared to the current share price of $90.87).

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.