BJ's Wholesale Club (BJ, Financial) saw its stock rise by 9% to a new all-time high following its Q3 earnings report. The company posted its largest EPS upside in nine quarters, although it provided a lower adjusted EPS guidance for Q4 at $0.78-0.88. Revenue grew by 3.5% year-over-year to $5.10 billion, aligning with expectations. BJ's board also approved a new $1 billion share repurchase program.
- Q3 comps (ex-fuel) increased by 3.8%, up from 2.4% in Q2 and 0.6% in Q1, surpassing expectations. The growth was driven by strong traffic, unit volumes, and market share gains both in-store and at gas pumps.
- Factors like the East coast port strike and hurricanes boosted Q3 sales as members stocked up. Even without these events, comps (ex-fuel) slightly exceeded expectations. Digital comps surged by 30%, marking a two-year stacked growth of 47%.
- Traffic grew for the 11th consecutive quarter. BJ gained grocery market share, with grocery and sundries posting 4% comps, led by perishables such as dairy, meat, and produce.
- General merchandise and services comps remained flat, but improvements in home and apparel categories were noted. Seasonal GM categories achieved positive comps for the first time in nine quarters, with increased interest in toys and books.
- Membership growth continued, with an 8% increase in membership fee income and a milestone of 7.5 million members in Q3. Since FY18, BJ's membership base has grown by 40%, with premium tier members doubling. Starting January 1, 2025, membership fees will increase by $5 to $60 for Club and by $10 to $120 for Club+.
Overall, BJ's report is promising with significant EPS upside and robust comp growth. While the port strike and hurricanes may have shifted some sales from Q4 to Q3, BJ's grocery assortment improvements and market share gains are noteworthy. The $1 billion share buyback is substantial for a company with a $12.3 billion market cap. It's significant that BJ has broken out of its $78-90 trading range, indicating positive momentum.
