BJ's Counters Rising Costs with Membership Surge and Digital Growth

BJ's Wholesale Club (BJ) delivered a strong earnings report for its fiscal third quarter, with adjusted earnings per share (EPS) of $1.16, surpassing the consensus estimate of $1.09. The warehouse retailer also reported revenue of $5.35 billion, a 4.9% year-over-year increase, aligning with Wall Street expectations. Despite a slight decline in net income to $152.1 million from $155.7 million in the same period last year, the company raised its full-year guidance, signaling confidence in its business model.

The results were driven by robust membership fee income, which surged 9.8% year-over-year to $126.3 million, fueled by higher-tier membership penetration and a recent fee increase. Digitally enabled sales growth also stood out, with a 30% year-over-year increase in online sales, reflecting a two-year stacked growth rate of 61%. Comparable club sales rose 1.1% year-over-year, while excluding gasoline sales, the growth rate improved to 1.8%.

However, operating expenses rose to $788.2 million from $733.6 million a year earlier, driven by labor, occupancy and advertising costs tied to new store openings and digital expansion. The company's gross profit reached $1.01 billion, with merchandise gross margins remaining flat compared to the prior year according to tradingview data.

BJ's updated its fiscal 2025 outlook, narrowing its comparable club sales growth forecast to 2.0%-3.0% year-over-year (excluding gasoline sales) while raising adjusted EPS guidance to $4.30-$4.40 per share, up from the previous $4.20-$4.35 range. This aligns with the analyst consensus of $4.31 per share and reflects optimism about holiday season demand according to Nasdaq reporting. The company also plans $800 million in capital expenditures and continues repurchasing shares, spending $87.3 million in the third quarter alone as reported by Seeking Alpha.

Shares of BJ's rose 3.7% in premarket trading following the earnings release, with analysts highlighting the company's resilience in a volatile retail environment. Jefferies analyst Corey Tarlower noted that membership growth and digital sales momentum are key drivers, despite cost pressures. The stock trades at 20 times the next 12-month earnings, down from 24 three months ago, as investors weigh the company's expansion plans against market saturation risks according to Seeking Alpha.