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BJ's Wholesale Club (BJ) Rides High on Strategies: Apt to Hold

BJ's Wholesale Club Holdings, Inc. BJ looks well poised for growth, courtesy of its robust business strategies and sound fundamentals. Sturdy membership trends, assortment initiatives, enhanced digital capabilities and a robust real estate pipeline are steadily contributing to its performance. These factors have been aiding BJ's comparable sales growth for a while now.

This Westborough, MA-based player’s shares have appreciated 42.6% in a year against the industry’s 28.6% decline. An expected long-term earnings growth rate of 10% coupled with a VGM Score of A for this presently Zacks Rank #3 (Hold) player further speaks volumes.

For fiscal 2022, the Zacks Consensus Estimate for BJ’s sales and earnings per share (EPS) suggests growth of 6.4% and 7%, respectively, from the year-ago period’s corresponding reported figures.

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Detailing Growth Strategies

To drive overall growth, BJ's Wholesale Club is consistently simplifying assortments, boosting marketing and merchandising capabilities, expanding into high-demand categories and developing own-brand portfolio. Own brands penetration increased to 23% of merchandise sales during the third quarter of fiscal 2021.

In addition, management is focused on enhancing omni-channel capabilities and ramping up delivery services. We note that BJ built a strong digital portfolio with Bjs.com, BerkleyJensen.com, Wellsleyfarms.com, delivery.bjs.com and its mobile app. This enables members to buy, review products and digitally add coupons to their membership card.

BJ's Wholesale Club has been directing resources toward expanding digital capabilities to better engage with members and provide them a convenient way to shop, including same-day delivery, curbside pick-up and buy-online, pickup-in-club.

We note that digitally-enabled sales surged 44% during the fiscal third quarter, benefiting from BOPIC and curbside pickup services. On a two-year stacked basis, digitally-enabled sales soared 244%. The same drove nearly two percentage points of merchandise comp.

BJ's Wholesale also holds a three-year exclusive agreement with CommerceHub, a leading e-commerce platform allowing online order fulfillment and delivery solutions. BJ’s partnership with Citizens Pay to provide online financing solutions for large purchases also bodes well.

Wrapping Up

Despite the aforesaid sturdy efforts, BJ’s Wholesale Club is not immune to the ongoing supply-chain bottlenecks, including delivery delays and higher freight costs. Also, deleveraged SG&A expense is a concern.

Defying these headwinds, BJ’s robust strategic endeavors are constantly contributing to growth in membership signups and renewals, resulting in higher membership fee income, higher average members per club and decent comparable club sales growth. Membership fee income jumped 7.7% to $91.5 million during the fiscal third quarter.

3 Stocks to Consider

Some better-ranked stocks are Central Garden & Pet CENT, Kroger KR and Costco COST.

Central Garden & Pet, a leader in the pet supplies, and lawn and garden supplies space, has a Zacks Rank #2 (Buy), currently. CENT delivered a trailing four-quarter earnings surprise of 46.1%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Central Garden & Pet’s current financial year sales and EPS suggests growth of 6% and 6.5%, respectively, from the year-ago period’s corresponding readings.

Kroger, a renowned grocery retailer, has a Zacks Rank of 2 at present. KR has a trailing four-quarter earnings surprise of 20.3%, on average.

The Zacks Consensus Estimate for Kroger’s fiscal 2022 sales suggests growth of 1.8% from the year-ago corresponding reported figure. KR has an expected EPS growth rate of 8.4% for three-five years.

Costco, a general merchandise retailer, carries a Zacks Rank #2, currently. COST has a trailing four-quarter earnings surprise of 8.3%, on average.

The Zacks Consensus Estimate for Costco’s fiscal 2022 sales and EPS suggests growth of 10.9% and 14%, respectively, from the corresponding year-ago tallies. COST has an expected EPS growth rate of 8.8% for three-five years.


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The Kroger Co. (KR): Free Stock Analysis Report
 
BJ's Wholesale Club Holdings, Inc. (BJ): Free Stock Analysis Report
 
Costco Wholesale Corporation (COST): Free Stock Analysis Report
 
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