Membership-only discount retailer BJ’s Wholesale Club (NYSE:BJ) met Wall Street’s revenue expectations in Q4 CY2024, but sales fell by 1.5% year on year to $5.28 billion. Its non-GAAP profit of $0.93 per share was 6.4% above analysts’ consensus estimates.
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BJ's (BJ) Q4 CY2024 Highlights:
- Revenue: $5.28 billion vs analyst estimates of $5.26 billion (1.5% year-on-year decline, in line)
- Adjusted EPS: $0.93 vs analyst estimates of $0.87 (6.4% beat)
- Adjusted EBITDA: $264.6 million vs analyst estimates of $253.2 million (5% margin, 4.5% beat)
- Adjusted EPS guidance for the upcoming financial year 2025 is $4.20 at the midpoint, missing analyst estimates by 2.3%
- Operating Margin: 3.4%, in line with the same quarter last year
- Free Cash Flow Margin: 2.1%, similar to the same quarter last year
- Locations: 252 at quarter end, up from 243 in the same quarter last year
- Same-Store Sales rose 4% year on year (0.5% in the same quarter last year)
- Market Capitalization: $13.22 billion
Company Overview
Appealing to the budget-conscious individual shopping for a household, BJ’s Wholesale Club (NYSE:BJ) is a membership-only retail chain that sells groceries, appliances, electronics, and household items, often in bulk quantities.
Large-format Grocery & General Merchandise Retailer
Big-box retailers operate large stores that sell groceries and general merchandise at highly competitive prices. Because of their scale and resulting purchasing power, these big-box retailers–with annual sales in the tens to hundreds of billions of dollars–are able to get attractive volume discounts and sell at often the lowest prices. While e-commerce is a threat, these retailers have been able to weather the storm by either providing a unique in-store shopping experience or by reinvesting their hefty profits into omnichannel investments.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $20.5 billion in revenue over the past 12 months, BJ's is one of the larger companies in the consumer retail industry and benefits from a well-known brand that influences purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when you’ve penetrated most of the market. To expand meaningfully, BJ's likely needs to tweak its prices or enter new markets.
As you can see below, BJ's grew its sales at a mediocre 9.2% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts), but to its credit, it opened new stores and increased sales at existing, established locations.
This quarter, BJ's reported a rather uninspiring 1.5% year-on-year revenue decline to $5.28 billion of revenue, in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 6.3% over the next 12 months, a slight deceleration versus the last five years. We still think its growth trajectory is attractive given its scale and suggests the market is forecasting success for its products.
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Store Performance
Number of Stores
BJ's operated 252 locations in the latest quarter. It has opened new stores quickly over the last two years, averaging 3.4% annual growth, faster than the broader consumer retail sector.
When a retailer opens new stores, it usually means it’s investing for growth because demand is greater than supply, especially in areas where consumers may not have a store within reasonable driving distance.
Same-Store Sales
The change in a company's store base only tells one side of the story. The other is the performance of its existing locations and e-commerce sales, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at brick-and-mortar shops for at least a year.
BJ’s demand rose over the last two years and slightly outpaced the industry. On average, the company’s same-store sales have grown by 2.2% per year. This performance suggests its rollout of new stores could be beneficial for shareholders. When a retailer has demand, more locations should help it reach more customers and boost revenue growth.
In the latest quarter, BJ’s same-store sales rose 4% year on year. This growth was an acceleration from its historical levels, which is always an encouraging sign.
Key Takeaways from BJ’s Q4 Results
We enjoyed seeing BJ's beat analysts’ EPS expectations this quarter despite just in-line revenue. On the other hand, its full-year EPS guidance missed. Overall, this quarter was mixed. The stock remained flat at $100.10 immediately after reporting.
So should you invest in BJ's right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.