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BJ's Wholesale (BJ) Up 32% YTD: How Should Investors Play?
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BJ's Wholesale Club Holdings, Inc. (BJ - Free Report) remains resilient in the competitive retail sector, fueled by its compelling offerings and sturdy business model. Solid membership trends, product strategies, digital advancements and expansion plans have contributed to BJ's success.
BJ's Wholesale Club has been one of the standout performers in 2024, with its stock surging 32% year to date and comfortably outpacing the industry’s rise of 10% and the S&P 500’s growth of 17.5%. But with such substantial gains already achieved, how should investors approach this stock moving forward? Let’s dig further.
Closing at $87.97 as of Jul 5, shy of its 52-week high of $90.43 reached on Jun 18, 2024, the stock shows potential for further upward movement.
Technical indicators are supportive of BJ's Wholesale Club's strong performance. The stock is trading above both its 50-day and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in BJ's Wholesale Club's financial health and prospects.
Image Source: Zacks Investment Research
Decoding BJ’s Rally
BJ's Wholesale Club’s commitment to bolstering marketing and merchandising capabilities, coupled with its foray into high-demand categories and expansion of its own-brand portfolio, has yielded remarkable results. The company has been steadily increasing its footprint, targeting high-growth regions and underserved markets. This methodical approach ensures maximum return on investment and helps BJ's tap into new customer bases. It plans to open 11 more clubs in the back half of fiscal 2024.
The membership model at BJ’s Wholesale Club is another cornerstone of its success. With consistent growth in renewals and new sign-ups, BJ's offers members significant savings on a wide array of products, which strengthens customer loyalty. These have played a pivotal role in a notable surge in the membership fee income.
In the first quarter of fiscal 2024, the membership fee income witnessed a year-over-year increase of 8.6%, fueled by strong renewal rates and successful membership acquisition. We foresee a sustained improvement in the membership fee income as new club openings ramp up. For fiscal 2024 and 2025, we expect the membership fee income to increase at a rate of approximately 6.9% and 6%.
BJ's Wholesale Club's focus on expanding digital capabilities is another key aspect of its growth trajectory. Offering members convenient options such as same-day delivery, curbside pick-up and buy online and pick up in-club, the company ensures an engaging and seamless digital shopping experience. A robust digital portfolio, encompassing platforms like Bjs.com, BerkleyJensen.com, Wellsleyfarms.com and the BJ’s mobile app, underscores the commitment to digital excellence.
Management believes that digitally engaged members have higher average baskets and make more trips per year than members who shop in-club only. Digitally enabled comparable sales rose 21% in the first quarter of fiscal 2024. Clubs fulfill approximately 90% of digitally enabled sales.
What May Pull Back the Stock’s Momentum?
With the decline of stimulus-driven spending and persistently high interest rates, the industry finds itself at a pivotal juncture. Inflationary pressures are causing consumers to be more judicious with their disposable income, affecting various merchandise categories and creating hurdles for retailers. The drop in U.S. consumer sentiment in June signals further potential challenges as decreased consumer confidence could lead to reduced spending, exacerbating the industry's struggle.
It is essential to acknowledge the presence of the aforementioned headwinds, which may pose challenges to BJ's Wholesale Club's stock. Additionally, margins remain a critical area to monitor, with potential concerns stemming from any deleverage in the SG&A rate.
BJ's Wholesale Club's forward 12-month price-to-earnings ratio stands at 21.46, significantly higher than the industry’s ratio of 12.26. This suggests that investors may be paying a high price relative to the company's expected earnings growth. BJ has a Value Score of C.
Your Investment Strategy
Given BJ's solid operational metrics and strategic initiatives, coupled with favorable technical indicators, the stock presents a compelling case for holding positions. Investors should monitor consumer spending trends closely, as any sustained decline could impact retail performance broadly. Current stakeholders should consider BJ's Wholesale Club's evolving business strategy and maintain their position in this Zacks Rank #3 (Hold) stock, while potential new investors should exercise restraint.
3 Picks You Can’t Miss Out On
Here, we have highlighted three better-ranked stocks, namely Vital Farms (VITL - Free Report) , Ollie's Bargain Outlet (OLLI - Free Report) and Tractor Supply Company (TSCO - Free Report) .
Vital Farms offers a range of produced pasture-raised foods. It currently sports a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter average earnings surprise of 102.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 22.6% and 62.7%, respectively, from the year-ago reported numbers.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 10.4%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings implies growth of around 8% and 12%, respectively, from the year-ago reported numbers.
Tractor Supply Company, which operates as a rural lifestyle retailer, currently carries a Zacks Rank #2. TSCO has a trailing four-quarter earnings surprise of 2.7%, on average.
The Zacks Consensus Estimate for Tractor Supply Company’s current financial-year sales and earnings calls for growth of around 3% and 2.5%, respectively, from the year-ago reported numbers.
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BJ's Wholesale (BJ) Up 32% YTD: How Should Investors Play?
BJ's Wholesale Club Holdings, Inc. (BJ - Free Report) remains resilient in the competitive retail sector, fueled by its compelling offerings and sturdy business model. Solid membership trends, product strategies, digital advancements and expansion plans have contributed to BJ's success.
BJ's Wholesale Club has been one of the standout performers in 2024, with its stock surging 32% year to date and comfortably outpacing the industry’s rise of 10% and the S&P 500’s growth of 17.5%. But with such substantial gains already achieved, how should investors approach this stock moving forward? Let’s dig further.
Closing at $87.97 as of Jul 5, shy of its 52-week high of $90.43 reached on Jun 18, 2024, the stock shows potential for further upward movement.
Technical indicators are supportive of BJ's Wholesale Club's strong performance. The stock is trading above both its 50-day and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in BJ's Wholesale Club's financial health and prospects.
Image Source: Zacks Investment Research
Decoding BJ’s Rally
BJ's Wholesale Club’s commitment to bolstering marketing and merchandising capabilities, coupled with its foray into high-demand categories and expansion of its own-brand portfolio, has yielded remarkable results. The company has been steadily increasing its footprint, targeting high-growth regions and underserved markets. This methodical approach ensures maximum return on investment and helps BJ's tap into new customer bases. It plans to open 11 more clubs in the back half of fiscal 2024.
The membership model at BJ’s Wholesale Club is another cornerstone of its success. With consistent growth in renewals and new sign-ups, BJ's offers members significant savings on a wide array of products, which strengthens customer loyalty. These have played a pivotal role in a notable surge in the membership fee income.
In the first quarter of fiscal 2024, the membership fee income witnessed a year-over-year increase of 8.6%, fueled by strong renewal rates and successful membership acquisition. We foresee a sustained improvement in the membership fee income as new club openings ramp up. For fiscal 2024 and 2025, we expect the membership fee income to increase at a rate of approximately 6.9% and 6%.
BJ's Wholesale Club's focus on expanding digital capabilities is another key aspect of its growth trajectory. Offering members convenient options such as same-day delivery, curbside pick-up and buy online and pick up in-club, the company ensures an engaging and seamless digital shopping experience. A robust digital portfolio, encompassing platforms like Bjs.com, BerkleyJensen.com, Wellsleyfarms.com and the BJ’s mobile app, underscores the commitment to digital excellence.
Management believes that digitally engaged members have higher average baskets and make more trips per year than members who shop in-club only. Digitally enabled comparable sales rose 21% in the first quarter of fiscal 2024. Clubs fulfill approximately 90% of digitally enabled sales.
What May Pull Back the Stock’s Momentum?
With the decline of stimulus-driven spending and persistently high interest rates, the industry finds itself at a pivotal juncture. Inflationary pressures are causing consumers to be more judicious with their disposable income, affecting various merchandise categories and creating hurdles for retailers. The drop in U.S. consumer sentiment in June signals further potential challenges as decreased consumer confidence could lead to reduced spending, exacerbating the industry's struggle.
It is essential to acknowledge the presence of the aforementioned headwinds, which may pose challenges to BJ's Wholesale Club's stock. Additionally, margins remain a critical area to monitor, with potential concerns stemming from any deleverage in the SG&A rate.
BJ's Wholesale Club's forward 12-month price-to-earnings ratio stands at 21.46, significantly higher than the industry’s ratio of 12.26. This suggests that investors may be paying a high price relative to the company's expected earnings growth. BJ has a Value Score of C.
Your Investment Strategy
Given BJ's solid operational metrics and strategic initiatives, coupled with favorable technical indicators, the stock presents a compelling case for holding positions. Investors should monitor consumer spending trends closely, as any sustained decline could impact retail performance broadly. Current stakeholders should consider BJ's Wholesale Club's evolving business strategy and maintain their position in this Zacks Rank #3 (Hold) stock, while potential new investors should exercise restraint.
3 Picks You Can’t Miss Out On
Here, we have highlighted three better-ranked stocks, namely Vital Farms (VITL - Free Report) , Ollie's Bargain Outlet (OLLI - Free Report) and Tractor Supply Company (TSCO - Free Report) .
Vital Farms offers a range of produced pasture-raised foods. It currently sports a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter average earnings surprise of 102.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 22.6% and 62.7%, respectively, from the year-ago reported numbers.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 10.4%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current financial-year sales and earnings implies growth of around 8% and 12%, respectively, from the year-ago reported numbers.
Tractor Supply Company, which operates as a rural lifestyle retailer, currently carries a Zacks Rank #2. TSCO has a trailing four-quarter earnings surprise of 2.7%, on average.
The Zacks Consensus Estimate for Tractor Supply Company’s current financial-year sales and earnings calls for growth of around 3% and 2.5%, respectively, from the year-ago reported numbers.