BJ's Wholesale (BJ) Q2 Earnings Top, Comps Rise, View Up
BJ’s Wholesale Club Holdings, Inc. BJ reported second-quarter fiscal 2022 results, with the top and the bottom line beating the Zacks Consensus Estimate and improving year over year. This operator of membership warehouse clubs registered robust growth in total comparable club sales. The better-than-expected results prompted management to lift the fiscal 2022 view.
Sturdy membership trends, assortment initiatives, enhanced digital capabilities and a robust real estate pipeline aided the company’s performance. Management remains optimistic about the business, given the sustained strength in the grocery business.
Shares of BJ’s Wholesale Club were up 7.2% during the trading session on Aug 18, following the company’s impressive performance. This Zacks Rank #2 (Buy) stock has advanced 41.8% in the past three months compared with the industry’s rise of 24.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Q2 Insights
BJ’s Wholesale Club reported adjusted earnings of $1.06 per share that surpassed the Zacks Consensus Estimate of 83 cents. The quarterly earnings increased 29.3% from 82 cents in the year-ago quarter.
The company generated total revenues of $5,103.8 million that surged 22.2% from the year-ago quarter’s levels and surpassed the consensus mark of $4,688 million. Net sales moved up 22.4% to $5,005 million, while membership fee income jumped 11.3% to $98.8 million.
Total comparable club sales during the quarter under discussion jumped 19.8% year over year. Excluding the impact of gasoline sales, comparable club sales rose 7.6%, driven by traffic growth and gains in market share led by grocery and perishable categories. Comps in the grocery, perishables and sundries division grew 8% in the quarter. Meanwhile, general merchandise and services division comps increased 4%.
We note that digitally-enabled sales rose 47% during the quarter, as members continued to take benefit of services such as Buy Online Pickup In-Club and curbside pickup.
BJ's Wholesale Club Holdings, Inc. Price, Consensus and EPS Surprise
BJ's Wholesale Club Holdings, Inc. price-consensus-eps-surprise-chart | BJ's Wholesale Club Holdings, Inc. Quote
A Look at Margins
During second-quarter fiscal 2022, gross profit rose to $860 million from $763.5 million in the year-ago period. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, contracted 50 basis points from the year-ago quarter’s level. Higher freight costs as well as investments in inflationary categories and markdowns in general merchandise inventory hurt merchandise margins.
Operating income increased 23.9% to $202.9 million while operating margin expanded 10 basis points to 4%. We note that adjusted EBITDA climbed 24.3% to $273.7 million during the quarter, while the adjusted EBITDA margin increased 10 basis points to 5.4%.
SG&A expenses rose 8.9% to $651.2 million from the year-ago quarter. This reflects higher labor costs due to last year’s wage investments as well as the buyout, integration and operating expenses related to the acquisition of assets from Burris Logistics. As a percentage of total revenues, SG&A expenses shrunk 150 basis points to 12.8%.
Other Financial Details
BJ’s Wholesale Club ended the reported quarter with cash and cash equivalents of $163.7 million. Long-term debt amounted to $699.4 million, while stockholders’ equity was $853.6 million. Net cash provided by operating activities during the 26-week period ended on Jul 30, 2022, was $443.1 million.
As part of its share repurchase program, the company bought back 353,000 shares worth $22.8 million in the second quarter. At the end of the quarter, the company had $413 million remaining under its $500 million buyback authorization.
BJ’s Wholesale Club remains on track to open 11 new clubs this fiscal.
Outlook
Management now envisions fiscal 2022 comparable club sales, excluding the impact of gasoline sales, to increase between 4% and 5%, up from the prior view of low single-digit growth. BJ’s Wholesale Club now foresees full-year earnings in the band of $3.50-$3.60 per share, up from its earlier estimate of approximately $3.25 per share. However, the company expects continued merchandise margin rate pressure.
3 Stocks Hogging the Limelight
Here we have highlighted three better-ranked stocks, namely Dollar General DG, Costco COST and Dollar Tree DLTR.
Dollar General, a discount retailer, currently carries a Zacks Rank #2. DG has an expected EPS growth rate of 12.8% for three to five years.
The Zacks Consensus Estimate for Dollar General’s current financial-year revenues and EPS suggests growth of 10% and 13.6%, respectively, from the year-ago reported figure. Dollar General has a trailing four-quarter earnings surprise of 2.8%, on average.
Costco, which is engaged in the operation of membership warehouses, carries a Zacks Rank #2. COST has an expected EPS growth rate of 9.2% for three to five years.
The Zacks Consensus Estimate for Costco’s current financial-year sales and EPS suggests growth of 15.4% and 18.2%, respectively, from the year-ago period. COST has a trailing four-quarter earnings surprise of 9.7%, on average.
Dollar Tree operates discount variety retail stores. The stock currently carries a Zacks Rank #2. DLTR has an expected EPS growth rate of 15.5% for three to five years.
The Zacks Consensus Estimate for Dollar Tree’s current financial-year revenues and EPS suggests growth of 6.7% and 40.7%, respectively, from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.
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