BJ’s Wholesale Club Holdings, Inc. BJ reported its third-quarter fiscal 2024 results, showcasing mixed performance. While revenues fell short of the Zacks Consensus Estimate, earnings surpassed expectations. Both metrics improved year over year, supported by decent comparable club sales growth.
The Marlborough, MA-based company achieved a significant milestone by growing its membership base to 7.5 million members and announced its first membership fee hike in seven years. BJ’s unveiled a new $1 billion share repurchase program, underscoring its commitment to shareholder value.
Strong pricing strategies, innovative merchandise initiatives and advancements in digital solutions positively influenced the quarter’s performance. Building on these factors, management raised its fiscal 2024 guidance.
Shares of this Zacks Rank #3 (Hold) company rose 8.3% during the trading session yesterday. In the past six months, the stock has advanced 11.5% against the industry’s decline of 1%.
BJ’s Third-Quarter Insights
BJ’s Wholesale Club reported adjusted earnings of $1.18 per share, which came ahead of the Zacks Consensus Estimate of 91 cents and increased from the $1.00 reported in the year-ago period.
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This operator of membership warehouse clubs generated total revenues of $5,099.4 million, which grew 3.5% from the year-ago quarter’s level but missed the consensus mark of $5,126 million. Net sales increased 3.4% to $4,984.4 million, while membership fee income jumped 8.4% to $115 million.
Total comparable club sales during the quarter under discussion rose 1.5% year over year. Excluding the impact of gasoline sales, comparable club sales jumped 3.8%, led by robust traffic, and fared better than our estimate of a 2% increase. Markedly, digitally enabled comparable sales advanced 30% during the quarter.
BJ's Wholesale also expanded its footprint by opening three new clubs and four new gas stations during the quarter. The company expects to operate more than 250 clubs by the end of fiscal 2024.
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 BJ’s Margins
The gross profit rose to $975.5 million from $902.5 million in the year-ago period. The merchandise gross margin rate, which excludes gasoline sales and membership fee income, expanded 20 basis points from the year-ago quarter’s level owing to efficient cost management.
The operating income increased 15.1% year over year to $229.4 million, while the operating margin, as a percentage of total revenues, rose 50 basis points to 4.5%. We note that adjusted EBITDA improved 13.5% to $308.3 million during the quarter, while the adjusted EBITDA margin expanded 50 basis points to 6%.
Selling, general and administrative (SG&A) expenses rose 5.2% from the year-ago quarter to $733.6 million. This reflects higher labor and occupancy costs stemming from new club and gas station openings in addition to other investments to drive strategic priorities. As a percentage of total revenues, SG&A expenses deleveraged 20 basis points to 14.4%. We had anticipated SG&A expenses to deleverage 40 basis points.
BJ’s Wholesale Financial Snapshot
BJ’s Wholesale Club ended the quarter with cash and cash equivalents of $33.9 million. The long-term debt amounted to $398.7 million, while stockholders’ equity was $1,762.2 million.
Net cash provided by operating activities and adjusted free cash flow totaled $206.8 million and $18.8 million, respectively, for the 13 weeks ended on Nov. 2, 2024. As part of its share repurchase program, the company bought back 679,499 shares worth $58.2 million in the quarter.
Recently, BJ’s board of directors approved a new share repurchase program, authorizing the repurchase of up to $1 billion worth of shares, with the program set to expire in January 2029.
BJ to Hike Membership Fee
BJ’s Wholesale Club announced its first membership fee increase in seven years, set to take effect on Jan. 1, 2025. The annual fee for the Club membership will rise by $5 to $60, while the Club+ membership will see a $10 increase to $120.
The company also introduced a new perk for Club+ members, including BJ’s One+ Mastercard cardholders. Starting Jan. 1, 2025, these members will receive two free same-day deliveries on eligible orders of $50 or more during each membership year.
Here is What BJ Guided
Following the results, BJ’s Wholesale Club updated its fiscal 2024 guidance. The company now anticipates fourth-quarter comparable club sales, excluding gasoline sales, to increase between 2.5% and 3% year over year, resulting in full-year growth of 2.3% to 2.4%. Merchandise gross margins for fiscal 2024 are expected to remain approximately flat compared to the prior year.
Management guided fourth-quarter adjusted earnings per share between 78 cents and 88 cents, bringing the full-year adjusted earnings in the range of $3.90-$4.00 per share.
The current projection reflects an upgrade from the company’s earlier guidance issued on Aug. 22, 2024, which had anticipated fiscal 2024 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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