BJ’s Wholesale Club (BJ) Stock: Earnings Beat Expectations Despite Profit Dip

TLDR

• BJ’s Wholesale Club reported Q3 earnings of $1.16 per share, beating analyst expectations of $1.09-$1.10 per share
• Revenue increased 4.9% to $5.35 billion, meeting Wall Street estimates
• Membership fee income jumped 9.8% to $126.3 million due to strong acquisition and retention rates
• The company raised full-year earnings guidance to $4.30-$4.40 per share from previous $4.20-$4.35 range
• Shares climbed 3.7% in premarket trading following the earnings beat

BJ’s Wholesale Club delivered better-than-expected earnings in its fiscal third quarter. The warehouse retailer posted results that pleased investors even as overall profit declined from the previous year.

The Marlborough, Massachusetts-based company reported adjusted earnings of $1.16 per share for the quarter ended November 1. This beat analyst expectations of $1.09 to $1.10 per share. The earnings performance drove shares up 3.7% to $93.91 in premarket trading.

Total revenue rose 4.9% to $5.35 billion. This figure aligned with Wall Street models. The revenue growth came as the company continues expanding its store footprint and investing in its business.

BJ’s Wholesale Club Holdings, Inc., BJ

However, actual profit fell to $152.1 million from $155.7 million in the same quarter last year. On a per-share basis, earnings dropped slightly to $1.15 from $1.17. The decline came as operating expenses increased across several categories.

Selling, general and administrative expenses grew to $788.2 million from $733.6 million a year earlier. Higher labor and occupancy costs tied to new store openings drove much of the increase. Advertising costs also rose during the period.

Membership Income Drives Growth

The standout performance came from membership fee income. This metric jumped 9.8% to $126.3 million. Strong membership acquisition and retention fueled the growth. Higher-tier membership penetration across both new and existing clubs also contributed.

The company continues benefiting from an annual membership fee increase implemented earlier this year. This pricing change has boosted revenue without hurting membership numbers.

Comparable club sales climbed 1.1% during the quarter. When excluding gasoline sales, the increase reached 1.8%. This represented a two-year stacked growth rate of 5.5%. Analysts had anticipated a stronger gain of 2.4% to 2.7%.

Digital sales showed particular strength. Digitally enabled sales grew 30% year-over-year. Over two years, this channel posted 61% stacked growth.

Guidance Update and Holiday Season

BJ’s adjusted its full-year outlook based on year-to-date performance. The company narrowed its comparable club sales forecast. It maintained the low end at 2% growth while lowering the high end to 3% from 3.5% previously.

For earnings, BJ’s raised its full-year guidance. The company now expects adjusted earnings per share between $4.30 and $4.40. This compares to the previous range of $4.20 to $4.35. The analyst consensus stood at $4.31 per share.

Gross profit reached $1.01 billion in the quarter. The merchandise gross margin rate remained flat compared to the prior year period.

The company stayed active with share buybacks during the quarter. BJ’s repurchased 905,000 shares totaling $87.3 million. This continues the company’s capital allocation strategy of returning cash to shareholders.

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