KEY POINTS

  • BJ’S Wholesale Club Holdings Inc reported 2Q18 adjusted EPS of $0.31, above the consensus estimate of $0.27. Total revenues were $3.31 billion, beating the consensus estimate of $3.27 billion.
  • During the quarter, comparable sales increased 5%, which included a 3% impact from the sale of gasoline. It was the fourth consecutive quarter of positive merchandise comparable sales.
  • For Fiscal 2018, the company guided for adjusted EPS of $1.17–$1.24 compared to the consensus estimate of $1.13 and revenues in the range of $12.6–$12.7 billion compared to the consensus estimate of $12.96 billion.

2Q18 Results

BJ’S Wholesale Club Holdings Inc. reported 2Q18 total revenues of $3.31 billion, up 4.4% year over year and above the consensus estimate of $3.27 billion. Adjusted EPS was $0.31, beating the consensus estimate of $0.27. Net sales reported were $3.2 billion, a 4.3% increase from $3.1 billion from 2Q17. 

General merchandise business led merchandise comp sales gains of 4%. Comp sales of the edible and non-edible grocery businesses increased by 2% and 1%, respectively. Excluding gasoline sales, merchandise comparable sales grew 2% compared to 2Q17, making this the fourth consecutive quarter of positive merchandise comparable sales. 

Membership fee income grew from $64.2 million in 2Q17 to $70.4 million, up 9.7% year over year, driven by the increase in membership fees.

Gross margin increased to 16.0% compared to 15.8% in 2Q17. The category profitability improvement program was reported as the primary reason for the approximately 80-basis-points increase in gross margin, excluding the influence of gasoline sales. 

Although SG&A expenses increased from $477.3 million in 2Q17 to $549.2 million, excluding $51 million charges related to IPO process and management compensation, SG&A was $498.2 million compared to $473.2 million in 2Q17.

Adjusted EPS was $0.31, a 40.9% increase from $0.22 in 2Q17. The company reported a GAAP net loss of $0.05 per diluted share; adjusted net income excludes a $48.9 million charge for stock-based compensation, IPO-related costs and other items. 

Management detailed its plan for growth:

  • Acquire and retain members
    • The average BJ’s member can save about 10 times their investment in membership fees each year.
  • Deliver value to customers
    • Increase offerings in dairy, seafood, floral and frozen products.
    • Change apparel inventory three times more often than two years ago.
    • Invest in merchandising and assortments, new brands and improve in merchandise display.
  • Upgrade technology infrastructure, payment options and the online experience
    • Rolled out buy online, pick up in club (BOPIC) to all 215 clubs.
    • Improve omnichannel capabilities.
    • Added same-day delivery across the chain for this quarter.
  • Expand strategic footprint
    • Reinvented the opening model using data-driven approach.

Recent Developments

  • The company sold 43.1 million shares of its common stock at $17.00 per share to the public during its recent IPO, and the total net proceeds from the transaction were $691 million. 

Outlook

BJ’S Wholesale provided initial full-year guidance for fiscal 2018:

  • Revenues in the range of $12.6–$12.7 billion.
  • Net income of $101–$111 million.
  • Adjusted net income in the $163–$173 million range.
  • Adjusted EPS of $1.17–$1.24.
  • Plan to open 15–20 new clubs over the next five years.

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