BJ’s Wholesale Club Reports Mixed Q3 Results, Membership Fee Increase Ahead

BJ’s Wholesale Club Holdings, Inc. has released its third-quarter fiscal 2024 results, revealing a mixed performance. Although revenue missed expectations according to the Zacks Consensus Estimate, earnings exceeded projections. Both revenue and earnings showed year-over-year improvements, bolstered by solid comparable club sales growth.

Based in Marlborough, MA, BJ’s reached an important milestone by expanding its membership base to 7.5 million members and announced its first membership fee increase in seven years. The company revealed a significant $1 billion share repurchase program, highlighting its focus on shareholder value.

Effective pricing strategies, innovative merchandise offerings, and improvements in digital services positively impacted the quarter’s results. Given these encouraging factors, management has raised its fiscal 2024 guidance.

During yesterday’s trading session, shares of this Zacks Rank #3 (Hold) company climbed 8.3%. Over the past six months, the stock has gained 11.5%, contrasting with the industry’s decline of 1%.

Third-Quarter Performance Overview

BJ’s Wholesale Club reported adjusted earnings of $1.18 per share, which is higher than the Zacks Consensus Estimate of 91 cents and up from $1.00 reported for the same period last year.

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The company generated total revenues of $5,099.4 million, reflecting a 3.5% increase from the previous year, yet falling short of the consensus estimate of $5,126 million. Net sales grew by 3.4% to $4,984.4 million, while membership fee revenue rose 8.4% to $115 million.

Comparable club sales increased by 1.5% year over year. Excluding gasoline sales, this figure jumped 3.8%, exceeding the expected 2% increase, driven by a surge in customer traffic. Notably, digitally enabled comparable sales soared by 30% during the quarter.

BJ’s Wholesale expanded its presence by opening three new clubs and four new gas stations in the quarter. The company plans to operate more than 250 clubs by the end of fiscal 2024.

BJ’s Financial Insights: Price, Consensus, and EPS Surprise

BJ’s Wholesale Club Holdings, Inc. price-consensus-eps-surprise-chart | BJ’s Wholesale Club Holdings, Inc. Quote

Examining BJ’s Margins

BJ’s gross profit rose to $975.5 million, compared to $902.5 million in the same quarter a year ago. The merchandise gross margin rate, excluding gasoline sales and membership fees, improved by 20 basis points due to effective cost management.

Operating income increased by 15.1% year over year to $229.4 million, while operating margin improved by 50 basis points to 4.5% of total revenues. Adjusted EBITDA also rose, improving by 13.5% to reach $308.3 million, with the adjusted EBITDA margin growing by 50 basis points to 6%.

Selling, general, and administrative (SG&A) expenses climbed 5.2% from last year, totaling $733.6 million. This reflects the costs associated with new club and gas station openings and other strategic investments. SG&A expenses, as a percentage of total revenues, decreased by 20 basis points to 14.4%, contrary to expectations of a higher decrease.

BJ’s Financial Summary

At the end of the quarter, BJ’s Wholesale Club reported cash and cash equivalents of $33.9 million and long-term debt of $398.7 million. Stockholders’ equity stood at $1,762.2 million.

For the 13 weeks ending November 2, 2024, the company generated net cash from operating activities totaling $206.8 million and an adjusted free cash flow of $18.8 million. As part of its share repurchase plan, BJ’s repurchased 679,499 shares for $58.2 million in the quarter.

Recently, BJ’s board approved a new share repurchase initiative, allowing for the purchase of up to $1 billion in shares, set to expire in January 2029.

Upcoming Membership Fee Increase

BJ’s Wholesale Club will implement its first membership fee increase in seven years, effective January 1, 2025. The standard annual fee will rise by $5 to $60, while the Club+ membership will increase by $10 to $120.

A new benefit for Club+ members, including holders of the BJ’s One+ Mastercard, will provide two free same-day deliveries on eligible orders over $50 during each membership year, starting January 1, 2025.

Future Guidance from BJ’s

Following these results, BJ’s Wholesale Club has updated its fiscal 2024 guidance. The company forecasts fourth-quarter comparable club sales, excluding gasoline, to rise between 2.5% and 3% year over year, indicating full-year growth of 2.3% to 2.4%. Merchandise gross margins are expected to remain stable compared to the prior year.

Management projects adjusted earnings per share for the fourth quarter to be between 78 cents and 88 cents, bringing full-year adjusted earnings to a range of $3.90-$4.00 per share.

This revised outlook marks an upgrade from the previous guidance provided on August 22, 2024, which anticipated annual comparable club sales growth at the high end of a 1%-2% range and adjusted earnings per share leaning toward the lower end of the $3.75-$4.00 range.

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