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BJ shares test key trend line support following earnings release

AInvestThursday, Mar 7, 2024 9:31 am ET
2min read

BJ's Wholesale Club Holdings Inc. (BJ), a leading membership-based warehouse club operator, reported its fourth-quarter earnings for fiscal year 2023. Shares slipped 2% in the pre-market and are coming in to test last weeks low of $70.65. This will be a key area to hold as the stock is in danger of losing the upward trend support line established at the start of February. 

The company surpassed earnings expectations, with earnings per share (EPS) of $1.11, compared to the consensus estimate of $1.06. Revenues also increased by 8.7% year-over-year to $5.36 billion, slightly missing Street expectations of $5.38 billion.

The company witnessed a significant 28.0% year-over-year growth in digitally-enabled comparable sales. Income from continuing operations stood at $145.9 million, with adjusted EBITDA of $290.7 million.

The company's membership fee income also increased by 6.5% to $108.4 million. Moreover, BJ's Wholesale Club maintained a high member renewal rate of 90% during fiscal 2023. Total comparable club sales decreased by 0.4% in the fourth quarter of fiscal 2023 compared to the same period last year. Excluding the impact of gasoline sales, comparable club sales increased by 0.5%. For the full fiscal year 2023, comparable club sales decreased by 1.0% compared to the previous year but registered a 1.7% increase when excluding gasoline sales.

The company reported a gross profit of $963.3 million in the fourth quarter of fiscal 2023, an improvement from the $903.2 million in the same period in the prior year. However, the merchandise gross margin rate, excluding gasoline sales and membership fee income, declined by 40 basis points compared to the fourth quarter of fiscal 2022. This decrease was primarily due to ongoing investments in the business and lower ancillary income. For the full fiscal year 2023, gross profit amounted to $3.64 billion, reflecting an increase of approximately 6%, while the merchandise gross margin rate experienced a 50 basis point improvement.

Selling, general, and administrative expenses (SG&A) increased to $741.1 million in the fourth quarter of fiscal 2023, primarily due to costs associated with labor, occupancy, and depreciation resulting from new club and gas station openings, as well as other strategic investments. SG&A for the full fiscal year 2023 amounted to $2.82 billion.

Net income for the fourth quarter of fiscal 2023 was $145.9 million, an increase from $129.8 million in the same period the previous year. For the full fiscal year 2023, net income reached $523.7 million, compared to $513.2 million in fiscal 2022.

Adjusted EBITDA demonstrated growth, increasing by 8.9% in the fourth quarter of fiscal 2023 to $290.7 million, compared to $267.0 million in the same period in the prior year. For the full fiscal year 2023, adjusted EBITDA was $1.08 billion, up from $1.01 billion in fiscal 2022.

Looking ahead to fiscal year 2024, BJ's Wholesale Club provided guidance for comparable club sales growth, excluding gasoline sales, of 1% to 2% year-over-year. The company anticipates improving merchandise gross margins by approximately 20 basis points. Adjusted EPS for fiscal 2024 is projected to range from $3.75 to $4.00. Moreover, BJ's Wholesale Club expects to invest approximately $500 million in capital expenditures.

In conclusion, BJ's Wholesale Club demonstrated a solid performance in the fourth quarter of fiscal year 2023, with earnings exceeding expectations and year-over-year growth in various financial metrics. Despite a slight decline in total comparable club sales, the company's focus on accelerating traffic and improving merchandise margins positions it well for the future. With a robust membership renewal rate and continued investments in strategic priorities, BJ's Wholesale Club remains determined to drive strong results in fiscal year 2024.


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