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BJ's Wholesale Club (BJ) Q2 Earnings Top, Digital Sales Rise
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BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) registered a stellar performance in second-quarter fiscal 2020, wherein both the top and the bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. The quarter marked the second straight sales and earnings beat. Notably, the company continued to witness strong comparable club sales. The metric gained from strength in the digital channel, courtesy of customers’ increased shift to online shopping amid coronavirus-led social distancing.
The operator of membership warehouse clubs reported adjusted earnings of 77 cents a share that surpassed the Zacks Consensus Estimate of 60 cents, and rose sharply from 39 cents in the year-ago period. The bottom line gained from solid top-line growth, disciplined capital expense management and reduced interest expense.
BJ’s Wholesale Club generated total revenues of $3,954.1 million that increased 18.2% from the year-ago period and outpaced the Zacks Consensus Estimate of $3,746 million. While net sales jumped 18.4% to $3,871.6 million, membership fee income were up 10.4% to $82.5 million.
Shares of this Westborough, MA-based company have gained 19.8% in the past three months compared with the industry’s growth of 5.7%.
Let’s Delve Deeper
BJ’s Wholesale Club’s focus on simplifying assortments, expanding into high-demand categories and building own-brands portfolio is commendable. It also remains committed toward enhancing omni-channel capabilities and providing value to customers. Cumulatively, these endeavors have been contributing to growth in membership signups and renewals, resulting in higher membership fee income and decent comparable club sales growth.
Comparable club sales during the quarter under review rose 17.2%, following an increase of 19.9% in the preceding quarter. Excluding the impact of gasoline sales, comparable club sales surged 24.2% during the quarter, after increasing 27% in the preceding period. We note that digitally-enabled sales soared 300%, and added 6 percentage points to comparable club sales, excluding gasoline sales.
BJs Wholesale Club Holdings, Inc. Price, Consensus and EPS Surprise
No wonder, the company has been directing resources toward expanding digital capabilities in order to better engage with members and provide them a convenient way to shop, including same-day delivery, curbside pick-up, and buy-online, pickup-in-club.
During the quarter gross profit grew 23.4% to $756.4 million. However, merchandise gross margin rate, which excludes gasoline sales and membership fee income, remained flat year over year. We note that decent sales performance in general merchandise business and continued execution of category profitability improvement, was offset by commodity cost inflation, primarily beef and distribution costs related with COVID-19.
Operating income surged 65.7% to $163.6 million, while operating margin increased 110 bps to 4.1%. Adjusted EBITDA rose 41.6% to $216.9 million, while adjusted EBITDA margin expanded 90 bps to 5.5%.
SG&A expenses rose 15.4% to $590.8 million from the year-ago period, however, as a percentage of total revenues, the same contracted 40 basis points to 14.9%. The year-over-year increase in SG&A expenses was due to costs associated with the ongoing pandemic, which include wage increases, bonuses, safety and protective equipment, and other operating expenses. Management expects to incur roughly $20-$25 million of incremental costs related to COVID-19 in the third quarter.
Other Financial Details
BJ’s Wholesale Club, which carries a Zacks Rank #2 (Buy), ended second quarter with cash and cash equivalents of $168.8 million, up from $29.1 million at the end of the prior-year quarter. Long-term debt decreased to $1,202.2 million from $1,540.6 million a year ago. Stockholders’ equity was $119.1 million. Management incurred capital expenditures of $47.8 million in the quarter under review. The company generated free cash flow of approximately $220.1 million during the quarter under review. Additionally, the company bought back $34.1 million worth of shares and paid down $150 million of its first lien debt.
Sprouts Farmers Market (SFM - Free Report) has a trailing four-quarter average earnings surprise of 49.9% and a Zacks Rank #2.
Dollar General (DG - Free Report) has a long-term earnings growth rate of 12.5%. Currently, it carries a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
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BJ's Wholesale Club (BJ) Q2 Earnings Top, Digital Sales Rise
BJ’s Wholesale Club Holdings, Inc. (BJ - Free Report) registered a stellar performance in second-quarter fiscal 2020, wherein both the top and the bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. The quarter marked the second straight sales and earnings beat. Notably, the company continued to witness strong comparable club sales. The metric gained from strength in the digital channel, courtesy of customers’ increased shift to online shopping amid coronavirus-led social distancing.
The operator of membership warehouse clubs reported adjusted earnings of 77 cents a share that surpassed the Zacks Consensus Estimate of 60 cents, and rose sharply from 39 cents in the year-ago period. The bottom line gained from solid top-line growth, disciplined capital expense management and reduced interest expense.
BJ’s Wholesale Club generated total revenues of $3,954.1 million that increased 18.2% from the year-ago period and outpaced the Zacks Consensus Estimate of $3,746 million. While net sales jumped 18.4% to $3,871.6 million, membership fee income were up 10.4% to $82.5 million.
Shares of this Westborough, MA-based company have gained 19.8% in the past three months compared with the industry’s growth of 5.7%.
Let’s Delve Deeper
BJ’s Wholesale Club’s focus on simplifying assortments, expanding into high-demand categories and building own-brands portfolio is commendable. It also remains committed toward enhancing omni-channel capabilities and providing value to customers. Cumulatively, these endeavors have been contributing to growth in membership signups and renewals, resulting in higher membership fee income and decent comparable club sales growth.
Comparable club sales during the quarter under review rose 17.2%, following an increase of 19.9% in the preceding quarter. Excluding the impact of gasoline sales, comparable club sales surged 24.2% during the quarter, after increasing 27% in the preceding period. We note that digitally-enabled sales soared 300%, and added 6 percentage points to comparable club sales, excluding gasoline sales.
BJs Wholesale Club Holdings, Inc. Price, Consensus and EPS Surprise
BJs Wholesale Club Holdings, Inc. price-consensus-eps-surprise-chart | BJs Wholesale Club Holdings, Inc. Quote
No wonder, the company has been directing resources toward expanding digital capabilities in order to better engage with members and provide them a convenient way to shop, including same-day delivery, curbside pick-up, and buy-online, pickup-in-club.
During the quarter gross profit grew 23.4% to $756.4 million. However, merchandise gross margin rate, which excludes gasoline sales and membership fee income, remained flat year over year. We note that decent sales performance in general merchandise business and continued execution of category profitability improvement, was offset by commodity cost inflation, primarily beef and distribution costs related with COVID-19.
Operating income surged 65.7% to $163.6 million, while operating margin increased 110 bps to 4.1%. Adjusted EBITDA rose 41.6% to $216.9 million, while adjusted EBITDA margin expanded 90 bps to 5.5%.
SG&A expenses rose 15.4% to $590.8 million from the year-ago period, however, as a percentage of total revenues, the same contracted 40 basis points to 14.9%. The year-over-year increase in SG&A expenses was due to costs associated with the ongoing pandemic, which include wage increases, bonuses, safety and protective equipment, and other operating expenses. Management expects to incur roughly $20-$25 million of incremental costs related to COVID-19 in the third quarter.
Other Financial Details
BJ’s Wholesale Club, which carries a Zacks Rank #2 (Buy), ended second quarter with cash and cash equivalents of $168.8 million, up from $29.1 million at the end of the prior-year quarter. Long-term debt decreased to $1,202.2 million from $1,540.6 million a year ago. Stockholders’ equity was $119.1 million. Management incurred capital expenditures of $47.8 million in the quarter under review. The company generated free cash flow of approximately $220.1 million during the quarter under review. Additionally, the company bought back $34.1 million worth of shares and paid down $150 million of its first lien debt.
3 Stocks Hogging the Limelight
Big Lots (BIG - Free Report) , a Zacks Rank #1 (Strong Buy) stock, has a long-term earnings growth rate of 7.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sprouts Farmers Market (SFM - Free Report) has a trailing four-quarter average earnings surprise of 49.9% and a Zacks Rank #2.
Dollar General (DG - Free Report) has a long-term earnings growth rate of 12.5%. Currently, it carries a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>