BJ’s Wholesale Club Holdings, Inc. BJ reported first-quarter fiscal 2023 results, wherein the bottom line beat the Zacks Consensus Estimate and the top line missed the same. This operator of membership warehouse clubs registered robust growth in total comparable club sales.
Sturdy membership trends, assortment initiatives, enhanced digital capabilities and a robust real estate pipeline aided the company’s performance. Management remains optimistic about the company’s prospects.
BJ’s Wholesale Club reported adjusted earnings of 85 cents per share, which surpassed the Zacks Consensus Estimate by a penny. The quarterly earnings declined 2.3% from 87 cents in the year-ago quarter.
The company generated total revenues of $4,723.1 million, which rose 5% from the year-ago quarter’s levels. However, the metric missed the consensus mark of $4,812 million. Net sales moved up 5% to $4,620.6 million, while membership fee income jumped 6.1% to $102.5 million.
Total comparable club sales during the quarter under discussion jumped 2% year over year. Excluding the impact of gasoline sales, comparable club sales rose 5.7%. We note that digitally-enabled sales rose 19% during the quarter.
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
In the first quarter, the gross profit rose to $880 million from $790.6 million reported in the year-ago period. The merchandise gross margin rate, which excludes gasoline sales and membership fee income, expanded 100 basis points (bps) from the year-ago quarter’s level owing to improved inventory management and moderated supply-chain cost.
Operating income increased 24.3% to $186.8 million, while the operating margin increased 70 bps to 4%. We note that adjusted EBITDA climbed 16.4% to $257 million during the quarter, while the adjusted EBITDA margin increased 53 bps to 5.4%.
Selling, general and administrative (SG&A) expenses rose 8.5% to $689.3 million from the year-ago quarter. This reflects higher labor and occupancy costs due to new club and gas station openings, as well as other investments incurred to drive strategic priorities. As a percentage of total revenues, SG&A expenses expanded 46 bps to 14.6%.
Net cash provided by operating activities during the first quarter ended on Apr 29, 2023, was $23.4 million. Cash from operating activities and free cash flow were $119.1 million and $27 million, respectively, during the quarter. The long-term debt amounted to $448 million, while stockholders’ equity was $1,132 million in the first quarter of 2023.
As part of its share repurchase program, the company bought back 204,040 shares worth $15.3 million in the first quarter. BJ’s Wholesale Club opened two new clubs in the quarter and expects to open 11 new clubs in 2023.
On Feb 27, 2023, BJ's Wholesale Club launched its new credit card program with Capital One and Mastercard, officially known as the BJ's One Mastercard® program. The company believes that this program will provide first-class rewards and customer service experience, giving its members more value. The program will provide up to 5% in-club earnings and 2% out-of-club earnings as well as 15 cents off per gallon at BJ's Gas.
Management reaffirmed its fiscal 2023 outlook. It envisions fiscal 2023 comparable club sales, excluding the impact of gasoline sales, to increase between 4% and 5% compared with 6.5% growth registered in fiscal 2022. BJ’s Wholesale Club expects membership fee income to increase in the band of 5% to 6% year over year.
The company foresees fiscal 2023 merchandise gross margin expansion of approximately 40 bps year over year. It expects fiscal 2023 earnings per share (EPS) to remain approximately flat year over year, including the 53rd-week benefit of low-teens cents per share.
For the second quarter of 2023, management expects merchandise comps in the low single-digit range. Earnings per share are expected to be slightly higher than preceding quarter.
Shares of this Zacks Rank #3 (Hold) company have declined 11.5% in the past three months compared with the industry’s fall of 1.5%.
3 Stocks Hogging the Limelight
Here we have highlighted three top-ranked stocks, namely Kroger KR, Ollie's Bargain Outlet Holdings OLLI and General Mills GIS.
Kroger, which operates as a supermarket operator, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Kroger’s current financial-year revenues and EPS suggests growth of 2.5% and 6.2%, respectively, from the year-ago reported figure. Kroger has a trailing four-quarter earnings surprise of 9.8%, on average.
Ollie's Bargain, largest retailer of closeout merchandise and excess inventory, carries a Zacks Rank #2 at present. The expected EPS growth rate for three to five years is 21.8%.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year revenues and EPS suggests growth of 11.8% and 58.6%, respectively, from the year-ago reported figure.
General Mills, which manufactures and markets branded consumer foods, currently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 7.5%.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 6.3% and 7.4% from the year-ago period. GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
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