BJ’s Wholesale: A Mixed Quarter Masks a Stronger Growth Story – Is This a Buying Opportunity?

The recent Q1 2025 earnings report from BJ’s Wholesale (NYSE: BJ) offered a classic case of “don’t judge a book by its cover.” While revenue fell short of expectations, the company’s EBITDA and EPS outperformance, paired with strategic execution in membership growth and store expansion, suggest investors may be overlooking a compelling opportunity. Here’s why the dip in shares could mark a strategic entry point—if you’re willing to look past the headline numbers.

Reconciling the Mixed Results: Why Revenue Isn’t the Whole Story

BJ’s reported net sales of $5.03 billion, trailing the $5.19 billion–$5.20 billion consensus. This shortfall, however, was offset by a 20.9% surge in adjusted EBITDA to $285.8 million and an EPS beat of $1.14 versus estimates of $0.91. The key takeaway? Margin resilience is winning the day.

The company’s focus on cost discipline—particularly in reducing SG&A as a percentage of revenue—has amplified profitability. Even as labor and occupancy costs rose, operating income jumped 26.7% to $203.6 million, demonstrating that BJ’s can grow profitably even in a challenging macro environment.

The Membership Model: A Steady Engine of Recurring Revenue

Membership fee income rose 8.1% to $120.4 million, a quiet but critical driver of stability. With 6.7 million active members (up from 6.3 million a year ago), the recurring revenue stream from fees insulates BJ’s from volatility in discretionary spending. This model, akin to a subscription business, is increasingly valuable in an economy where consumer confidence fluctuates.

The data supports this: shows fees growing at twice the rate of top-line sales. This trend suggests that even if same-store sales flatten, membership expansion could continue to fuel growth.

Same-Store Sales: A Glass Half-Full Perspective

Comparable club sales increased 1.6% overall, but excluding gasoline—a notoriously volatile category—the figure rises to 3.9%. This distinction matters. Gasoline sales are often a drag due to price fluctuations, but core merchandise growth remains solid.

Critics may point to the deceleration from prior quarters, but consider this: . BJ’s outperformed both peers in Q1 2025, suggesting its merchandising strategy and member loyalty hold up well in competitive markets.

Store Expansion: A Balancing Act Between Growth and Costs

The five new clubs and four gas stations opened in Q1 underscore BJ’s geographic expansion. While new stores boost long-term sales potential, they also increase upfront costs. SG&A expenses rose to $760.9 million, pressuring near-term margins.

The question is: Can these costs be managed as stores mature? Historically, BJ’s has shown that once new locations hit full operational capacity, their contribution margins align with existing stores. **** reveals a steady decline, suggesting the company is optimizing overhead.

Valuation: Is the Stock Pricing in the Risks?

At current levels, BJ’s trades at ~13.5x forward EPS, a discount to its five-year average of 16x. The dip post-earnings—despite strong profitability—has created a valuation sweet spot. However, two risks loom:

1. Store Saturation: With 244 clubs concentrated in the eastern U.S., BJ’s faces limits to organic growth in existing markets.
2. Margin Pressure: Rising labor and real estate costs could squeeze profitability if not controlled.

Why Now Could Be the Time to Buy

Despite these risks, the stock’s reaction to Q1 results appears overly pessimistic. The company’s full-year guidance remains intact: $4.10–$4.30 EPS and 2.0%–3.5% same-store sales growth (excluding gas). With membership momentum and margin discipline intact, BJ’s could surprise to the upside.

The shows a disconnect: shares have lagged EBITDA’s upward trajectory. If the market begins pricing in margin resilience, this gap could close rapidly.

Final Take: A Hold for the Long Game

BJ’s isn’t a “hot stock” for quick gains, but its fundamentals argue for a position in patient investors’ portfolios. The mixed Q1 results have created a buying opportunity—if you trust the durability of the membership model and the scalability of its operational improvements.

Just remember: The risks are real. Monitor SG&A trends closely, and consider averaging into the position as the company executes its expansion plans. For now, the data says hold, but the setup is ripe for a buy if valuation multiples compress further.

Investment decisions should be made with careful consideration of personal risk tolerance and financial goals. This analysis does not constitute financial advice.