Bj’s Wholesale Posts Upbeat Q1 Results; Shares Drop 5%

Bj’s Wholesale Club Holdings Inc. (BJ), the leading operator of membership warehouse clubs in the U.S. reported stronger-than-expected Q1 results. EPS of $0.72 beat the consensus estimate of $0.57 driven by strong consumer spending.

However, shares closed 5% lower on May 20, as the company did not provide any official guidance due to the lack of certainty associated with the COVID-19 situation and the related consumer behavior.

Total adjusted revenues grew 1.7% year-over-year to $3.78 billion, versus the consensus estimate of $3.62 billion. Comparable club sales declined 5% year-over-year, indicating a 2-year stacked comp club sales of 22% during the first quarter.

Merchandise margins grew 80 bps compared to a year ago attributable to a favorable general merchandise mix and positive results from the category profitability improvement (CPI) initiatives.

Additionally, management continues to enhance its footprint as it revealed its plan to launch six clubs in new locations in this fiscal year. (See Bj’s Wholesale Club stock analysis on TipRanks)

BJ’s CEO Bob Eddy commented, “As we look ahead, we are confident our business will continue to thrive over the long-term given structural shifts in consumer behaviour, the progress we made over the last year and our continued investments in our strategic priorities.”

Following the Q1 results announcement, Oppenheimer analyst Rupesh Parikh reiterated a Hold rating on the stock but did not assign any price target.

Parikh said, “We continue to be impressed with management’s ability to translate the pandemic related boosts into strong bottom line delivery. On a two-year basis, adjusted EPS is up 173%. Our Perform rating primarily reflects valuation coupled with a difficult setup. We await commentary on membership trends and renewals. Membership income growth was roughly in line with Street expectations.”

Overall, the stock has a Moderate Buy consensus rating based on 6 Buys and 4 Holds. The average analyst price target of $50.11 implies 8.6% upside potential from current levels. Shares of BJ have jumped 31% over the past year.

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