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BJ's Wholesale Club (BJ) Q4 Earnings Beat, Comps Up 8.8% Y/Y

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BJ’s Wholesale Club Holdings, Inc. BJ reported fourth-quarter fiscal 2021 results, wherein both the top and the bottom lines increased year over year. While total revenues met the Zacks Consensus Estimate, earnings beat the same. Sturdy membership trends, assortment initiatives, enhanced digital capabilities and robust real estate pipeline have been aiding the company’s performance. Impressively, this operator of membership warehouse clubs registered growth in total comparable club sales.

Well, in spite of decent results, shares of BJ’s Wholesale Club declined 13.2% during the trading session on Mar 3. Management’s commentary — “There continue to be several unknowns that make for significant variability as we look to frame guidance for the coming year” — was not well received by investors. The company highlighted inflationary pressure as well as government aid and stimulus package that are not likely to recur in fiscal 2022, as headwinds.

Q4 Insights

BJ’s Wholesale Club reported adjusted earnings of 80 cents a share that surpassed the Zacks Consensus Estimate of 75 cents. Markedly, the quarterly earnings increased 14.3% from 70 cents in the year-ago quarter.

This Westborough, MA-based company generated total revenues of $4,357.8 million that rose 10.4% from the year-ago quarter’s levels. Net sales moved up 10.4% to $4,263.5 million, while membership fee income jumped 9.5% to $94.3 million.

Total comparable club sales during the quarter under review rose 8.8%, reflecting two-year stacked comp sales of 21.8%. Excluding the impact of gasoline sales, comparable club sales inched up 0.9%, reflecting two-year stacked comp sales of 16.8%. Comps in grocery, perishables and sundries division grew 2% in the quarter and 19% on a two-year stacked basis.

We note that digitally-enabled sales rose 19% during the quarter, as members continue to take benefit of services such as BOPIC and curbside pickup. On a two-year stacked basis, digitally-enabled sales soared 187%.

BJ's Wholesale Club Holdings, Inc. Price, Consensus and EPS Surprise

BJ's Wholesale Club Holdings, Inc. Price, Consensus and EPS Surprise
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 fourth-quarter fiscal 2021, gross profit rose to $797.2 million from $742.6 million in the year-ago period. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, expanded 10 basis points from the year-ago quarter’s level. Merchandise margin gained from the mix of general merchandise sales, increased private label penetration and continued execution of category profitability improvement initiatives, partly offset by higher freight costs and price investments in inflationary categories.

Operating income increased 8.6% to $157.1 million while operating margin shrunk 10 basis points to 3.6%. We note that adjusted EBITDA climbed 11.8% to $228.6 million during the quarter.

SG&A expenses rose 6.3% to $630.5 million from the year-ago quarter. This reflects investments worth $13.6 million in club team member wages, depreciation and amortization expense and other expenses related to volume and continued investments to drive strategic priorities.

Key Financial Details & Other Updates

BJ’s Wholesale Club ended the reported quarter with cash and cash equivalents of $45.4 million. Long-term debt amounted to $748.6 million, while stockholders’ equity totaled $648.1 million. The company had paid down approximately $360 million in debt in fiscal 2021. Net cash provided by operating activities during the fourth quarter was $98.5 million. Management projects capital expenditures of about $350 million in fiscal 2022.

On Nov 16, 2021, the board of directors approved a new share buyback program that allows the company to repurchase up to $500 million of stock. As part of its share repurchase program, the company bought back 700,967 shares worth $44.2 million in the final quarter. This includes 249,625 shares totaling $15.3 million under the previously approved repurchase program, which expired in the quarter under discussion. At the end of fiscal 2021, the company had $471 million remaining under its $500 million authorization.

BJ’s Wholesale Club opened five new clubs and seven new gas stations in fiscal 2021. The company intends to open 11 clubs and 12 new gas stations in fiscal 2022.

Outlook

BJ’s Wholesale Club expects merchandise comparable club sales to increase in the low single-digit range in fiscal 2022. Management envisions both net sales and membership fee income to rise in the mid-single-digit range.

The company anticipates merchandise margins to remain flat year over year. It expects earnings per share to remain flat year over year after giving effect to the pending Burris acquisition of assets.

In January 2022, BJ’s Wholesale stated that it had entered into an agreement to acquire the assets and operations of four refrigerated distribution centers as well as a related private transportation fleet from Burris Logistics. The deal is anticipated to conclude in the second quarter and is likely to yield approximately 7 cents in earnings per share.

Shares of this Zacks Rank #3 (Hold) company have fallen 16.3% in the past three months compared with the industry’s decline of 14.4%.

3 Hot Stocks to Consider

We have highlighted three better-ranked stocks, namely, Boot Barn Holdings BOOT, Tractor Supply Company TSCO and Sprouts Farmers Market SFM.

Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel and accessories, sports a Zacks Rank #1 (Strong Buy). The company has an expected EPS growth rate of 20% for three-five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago period.

Tractor Supply Company, a rural lifestyle retailer in the United States, carries a Zacks Rank #2 (Buy). The company has an expected EPS growth rate of 9.8% for three-five years.

The Zacks Consensus Estimate for Tractor Supply Company’s current financial year sales and EPS suggests growth of 8.2% and 8%, respectively, from the year-ago period. TSCO has a trailing four-quarter earnings surprise of 22%, on average.

Sprouts Farmers, which offers fresh, natural, and organic food products, carries a Zacks Rank #2. The company has an expected EPS growth rate of 7.3% for three-five years.

The Zacks Consensus Estimate for Sprouts Farmers’ current financial year sales and EPS suggests growth of 4.7% and 4.8%, respectively, from the year-ago period. SFM has a trailing four-quarter earnings surprise of 17.9%, on average.


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