BJ's Wholesale Club Continues To Execute
BJ's Wholesale Club (NYSE: BJ) is a true pandemic success story. Not content to idly sit by and watch events unfold, the company boldly began working on several initiatives that have helped sustain growth into 2021. While the comps continue to get harder, the company is also still investing in its growth so we expect to see growth continue over the next year at least. Add to that the company's deep value compared to competitors like Walmart (NYSE: WMT) with its Sam's Club and Costco (NASDAQ: COST) which both trade at significantly higher multiples. Based on the results in the outlook, BJ's should be trading somewhere between Walmarts 24X earnings and Costco's 38X instead of the 19X you can get it for now.
“We have invested into our team members, the value of our membership, our digital infrastructure, and physical footprint to continue to accelerate our growth flywheel. With these investments, we are confident that we are well-positioned for long-term success,” said Bob Eddy, President, and Chief Executive Officer, BJ’s Wholesale Club.
BJ's Proves Its Game-Changing Year Is No Fluke
BJ's results are strong not only for this quarter but versus last year and the year before. The company reported $4.18 in consolidated revenue for a gain of 5.8% over last year. This beat the consensus estimate by a full 1000 basis points and is on top of a strong 18% comp in last year's second quarter. The company says its success is driven by the focus on membership which we view as very positive. Membership size and quality have both improved significantly over the past year with the first-year renewals running at historic levels.
On a comp basis, total comps grew 4% over last year and are up 21.2% over the same time frame in 2019. Ex-gas, sales are down -3.4% over last year but up 20.8% over the past two years. This reflects not only the increase in gasoline prices since last summer but also a slight decline in business in the wake of the pantry loading craze of 2020. eCommerce, another pillar of the company's growth strategy, also grew 4% versus last year and is up more than 300% over the past two years and should continue to grow if at a slower pace. The company reports that its customers, both new and old, are aggressively adopting new digital options including curbside pickup.
Moving down the report, the company experienced a slight widening of its margins. BJ's Wholesale Club reports $0.80 in GAAP earnings which beat the consensus by $0.15 and $0.82 in adjusted earnings which is up 6.5% over last year and beat the consensus by $0.16. Regardless, the second-quarter results put the company firmly on track to beat the full-year consensus so we expect to see the analysts begin upgrading the stock or at least raising their estimates and targets very soon.
"Looking ahead, we remain confident our business will continue to thrive and that our solid membership trends, assortment initiatives, enhanced digital capabilities and robust real estate pipeline will drive sustained and strong profitable growth," said Laura Felice, Executive Vice President, Chief Financial Officer, BJ's Wholesale Club.
The Technical Outlook: BJ's Sets A New All-Time High
The second-quarter results and outlook for BJ's were enough to push the stock up to a new all-time high. The move is accompanied by indicators that are a little mixed but generally bullish and set up to fire a strong trend-following signal. The trigger for us would be a clear break to new highs above $53.25. In that scenario, we see the stock trending higher into the $60 to $70 range within the next two to three months and possibly sooner.
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