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Category: BJ's Wholesale Club (BJ) vs Big Lots (BIG)
Date: 31 August 2020 Stock price of BJ's Wholesale Club: $46.25 Stock price of Big Lots (BIG): $49.96 Battle of the retailer stocks. We take a look at BJ's Wholesale Club (BJ) and Big Lots (BIG) stock over the last couple of years as well as investigate which one of these two retail groups is best placed to provide investors with superior returns based on their current stock price and fundamentals.
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So if one had to buy one of these two retail stocks now which one is the best buy? Is there a reason why the stock of Big Lots has underperformed against BJ's Wholesale? Or does the underperformance of Big Lots! provide a good opportunity to buy into their stock instead of that of BJ's Wholesale? Or is there a reason why BJ's Wholesale is outperforming that of Big Lots?"
More About BJ's Wholesale Club
BJ’s Wholesale Club is a leading warehouse club operator in the Eastern United States. We deliver significant value to our members, consistently offering 25% or more savings on a representative basket of manufacturer-branded groceries compared to traditional supermarket competitors. We provide a curated assortment focused on perishable products, continuously refreshed general merchandise, gasoline and other ancillary services to deliver a differentiated shopping experience, that is further enhanced by our omnichannel capabilities. Since pioneering the warehouse club model in New England in 1984, we have grown our footprint to 217 large-format, high volume warehouse clubs spanning 17 states. In our core New England markets, which have high population density and generate a disproportionate part of U.S. GDP, we operate almost three times the number of clubs of the next largest warehouse club competitor. In addition to shopping in our clubs, members are able to shop when and how they want through our website, www.bjs.com; our highly-rated mobile app; and our integrated Instacart same-day delivery offering.
Over the last four years, we have made multiple senior management hires and changes, adding consumer packaged goods, digital and consulting experience to our leadership team. This leadership team has implemented significant cultural and operational changes to our business, including transforming how we use data to improve member experience, instilling a culture of cost discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJ's more convenient. These changes have delivered results rapidly, evidenced by income from continuing operations growth of 16%, positive comparable club sales over the last ten quarters and adjusted EBITDA growth of 9% over the last three years. Our goal is to offer our members significant value and a meaningful return, in savings, on their annual membership fee. We have approximately 5.5 million members paying annual fees to gain access to savings on groceries, consumables, general merchandise, gas and ancillary services. The annual membership fee for our Inner Circle® Membership is $55 per year, and our BJ’s Perks Rewards® Membership, which offers additional value-enhancing features, costs $110 annually.
We believe that members can save over ten times their $55 Inner Circle membership fee versus what they would have paid at traditional supermarket competitors when they spend $2,500 or more per year at BJ’s on manufacturer-branded groceries. In addition to providing significant savings on a representative basket of manufacturer-branded groceries, we accept all manufacturer coupons and also carry our own exclusive brands that enable members to save on price without compromising on quality. Our two private label brands, Wellsley Farms® and Berkley Jensen® , represent over $2.0 billion in sales, and are the largest brands we sell. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 20 consecutive years of membership fee income growth. Our membership fee income was $302.2 million for fiscal year 2019
Quick facts about BJ's Wholesale Club
Summary of BJ's Wholesale Club latest earnings report
Our latest stock valuation of BJ's Wholesale Club: $42.90
Over the last four years, we have made multiple senior management hires and changes, adding consumer packaged goods, digital and consulting experience to our leadership team. This leadership team has implemented significant cultural and operational changes to our business, including transforming how we use data to improve member experience, instilling a culture of cost discipline, adopting a more proactive approach to growing our membership base and building an omnichannel offering oriented towards making shopping at BJ's more convenient. These changes have delivered results rapidly, evidenced by income from continuing operations growth of 16%, positive comparable club sales over the last ten quarters and adjusted EBITDA growth of 9% over the last three years. Our goal is to offer our members significant value and a meaningful return, in savings, on their annual membership fee. We have approximately 5.5 million members paying annual fees to gain access to savings on groceries, consumables, general merchandise, gas and ancillary services. The annual membership fee for our Inner Circle® Membership is $55 per year, and our BJ’s Perks Rewards® Membership, which offers additional value-enhancing features, costs $110 annually.
We believe that members can save over ten times their $55 Inner Circle membership fee versus what they would have paid at traditional supermarket competitors when they spend $2,500 or more per year at BJ’s on manufacturer-branded groceries. In addition to providing significant savings on a representative basket of manufacturer-branded groceries, we accept all manufacturer coupons and also carry our own exclusive brands that enable members to save on price without compromising on quality. Our two private label brands, Wellsley Farms® and Berkley Jensen® , represent over $2.0 billion in sales, and are the largest brands we sell. Our customers recognize the relevance of our value proposition across economic environments, as demonstrated by over 20 consecutive years of membership fee income growth. Our membership fee income was $302.2 million for fiscal year 2019
Quick facts about BJ's Wholesale Club
- BJ's Wholesale Club is listed on the NYSE under share code ticker: BJ
- BJ's Wholesale Club market capital: $6.38 billion (as at 31 August 2020)
- Number of employees of BJ's Wholesale Club: 27 200
- Number of BJ's Wholesale Club: 217
- Number of Club members: 5.5 million
Summary of BJ's Wholesale Club latest earnings report
- Total revenue: $3.871 billion (up from $3.271 billion from the same quarter of the previous year)
- Revenues increased by 18.3% over the last 12 months
- Cost of Sales: $3.197 billion (up from $2.733 billion for the same quarter of the previous year)
- Cost of sales increased by 16.9% over the last 12 months
- Some margin gain for BJ's wholesale as the surge in revenues outpaced the growth in their cost of sales.
- Net income: $106.618 million (up from $54.523 million loss for the same quarter of the previous year)
- Diluted earnings per share: $0.76 (up from $0.39 for the same quarter of the previous year)
- PE ratio of BJ's wholesale: 15.8
- Diluted weighted-average shares outstanding: 139.5 million (unchanged from 139.5 million for the same quarter of the previous year)
- Cash and cash equivalents: $168.811 million
- Cash and cash equivalents per share: $1.21
- Cash and cash equivalents makes up 2.62% of BJ's Wholesale Club's market capital
- Cash and cash equivalents makes up 3.2% of BJ's Wholesale Club's total assets
- Cash and cash equivalents per share: $1.21
- Receivables: $170.595 million
- Receivables makes up 3.2% of BJ's Wholesale Club's total assets
- Inventories: $1.005 billion
- Inventories makes up 18.9% of BJ's Wholesale Club's total assets
- Cash generated from operations for 6 months: $733.692 million
- Cash generated from operations per share for 6 months: $5.25
Our latest stock valuation of BJ's Wholesale Club: $42.90
More About Big Lots (BIG)
Headquartered in Columbus, Ohio, Big Lots, Inc. is a community retailer operating more than 1,400 Big Lots stores in 47 states, dedicated to friendly service, trustworthy value, and affordable solutions in every season and category – furniture, food, décor, and more. Our stock is traded on the New York Stock Exchange under the symbol BIG.
We exist to serve everyone like family, providing a better shopping experience for our customers, valuing and developing our associates, and creating growth for our shareholders. Big Lots supports the communities it serves through the Big Lots Foundation, a charitable organization focused on four areas of need: hunger, housing, healthcare, and education
Overview of Big Lots (BIG) latest earnings report
Our latest stock valuation of Big Lots (BIG): $57.50
We exist to serve everyone like family, providing a better shopping experience for our customers, valuing and developing our associates, and creating growth for our shareholders. Big Lots supports the communities it serves through the Big Lots Foundation, a charitable organization focused on four areas of need: hunger, housing, healthcare, and education
Overview of Big Lots (BIG) latest earnings report
- Net sales $1.644 billion
- Operating profit: $608.6 million
- Net income: $451.972 million
- Diluted earnings per share: $11.29
- PE ratio: 7
- Diluted number of shares outstanding: 40.040 million
- Cash dividend declared per common share: $0.30
- Dividend yield of Big Lots!: 2.4%
- Cash and cash equivalents: $898.60 million
- Cash and cash equivalents per share: $22.44
- Cash and cash equivalents on the group's balance sheet makes up 44.9% of the group's market capital
- Cash and cash equivalents makes up 21.5% of Big Lots! total assets
- Cash and cash equivalents per share: $22.44
- Inventories: $713.504 million
- Inventories makes up 17.1% of Big Lots! total assets
- Net cash provided by operating activities for 6 months of fiscal year: $322.363 million
- Net cash provided by operating activities per share for 6 months of fiscal year: $8.05
- Shareholders' equity in Big Lots!: $1.328 billion
- Shareholders' equity per share: $32.87
- So Big Lots is trading at 1.51 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at. For some perspective the average price to book value of firms in the S&P 500 is 3.7 times.
Our latest stock valuation of Big Lots (BIG): $57.50
The BJ's Wholesale Club (BJ) vs Big Lots (BIG) stock performance over the last 2 years
The image below shows the stock price performance of BJ's Wholesale Club (BJ) and Big Lots (BIG) over the last 2 years. Both are large retailers that are largely based in the USA and the stock price trends of the two firms in question are very similar. Below the stock price returns provided by the two stocks over the last 2 years.
The stock of BJ's Wholesale Club has easily outperformed the stock of Big Lots (BIG) over the last 2 years.
- BJ's Wholesale Club (BJ): 48.43%
- Big Lots (BIG): 13.55%
The stock of BJ's Wholesale Club has easily outperformed the stock of Big Lots (BIG) over the last 2 years.
So if one had to buy one of these two retail stocks now which one is the best buy? Is there a reason why the stock of Big Lots has underperformed against BJ's Wholesale? Or does the underperformance of Big Lots! provide a good opportunity to buy into their stock instead of that of BJ's Wholesale? Or is there a reason why BJ's Wholesale is outperforming that of Big Lots?
So let's take a look at the fundamentals and the valuation metrics in order to determine which of these two firms offers the most value at their current stock price.
One of our key metrics is the Price to Stockholders equity per share ratio. When looking at this we find the following:
Most firms tend to trade at a ratio of between 2 and 4 times its stockholders equity per share. The higher this ratio the less value a stock offers, and the lower this value the more value a stock offers. At a ratio of 1.51 for Big Lots is actually pretty low. However a stockholders deficit shows that a company's assets is less than its liabilities. And this is the case for BJ's Wholesale Club. So if they sell all their assets they wont be able to pay all their liabilities. So if they are liquidated debt holders will get any cash left and stockholders will get nothing
Next up cash as percentage of stock price:
Next up lets take a look at the percentage cash on the balance sheet makes up of each group's total assets:
Next up the PE ratio of the stock price:
Price relative to our valuation:
So BJ's Wholesale Club has a stockholders deficit, and Big Lots has a relatively low price/stockholders equity per share ratio. BJ's Wholesale is trading a higher PE ratio than Big Lots. For the cash as percentage of total assets Big Lots (BIG) cash makes up a far greater portion of their total assets than that of BJ's Wholesale Club. BJ's Wholesale Club is trading at a premium to our stock price valuation while Big Lots is trading at a discount to our latest valuation of the group.. Based on current stock prices, BJ's Wholesale is overvalued by almost 8% while Big Lots is undervalued by 13.1%.
Based on all the above if we have to buy one of these two retail giants we rate the stock of Big Lots (BIG) hands down as the WINNER in the battle between BJ's Wholesale stock vs Big Lots
One of our key metrics is the Price to Stockholders equity per share ratio. When looking at this we find the following:
- Price/Stockholders equity per share for BJ's Wholesale Club (BJ): Stockholders deficit so this ratio cannot be calculated
- Price/Stockholders equity per share for Big Lots (BIG): 1.51
Most firms tend to trade at a ratio of between 2 and 4 times its stockholders equity per share. The higher this ratio the less value a stock offers, and the lower this value the more value a stock offers. At a ratio of 1.51 for Big Lots is actually pretty low. However a stockholders deficit shows that a company's assets is less than its liabilities. And this is the case for BJ's Wholesale Club. So if they sell all their assets they wont be able to pay all their liabilities. So if they are liquidated debt holders will get any cash left and stockholders will get nothing
Next up cash as percentage of stock price:
- Cash as percentage of stock price for BJ's Wholesale Club (BJ): 2.6%
- Cash as percentage of stock price for Big Lots (BIG): 44.9%
Next up lets take a look at the percentage cash on the balance sheet makes up of each group's total assets:
- Cash as percentage of stock price for BJ's Wholesale Club (BJ): 3.2%
- Cash as percentage of stock price for Big Lots (BIG): 21.5%
Next up the PE ratio of the stock price:
- PE ratio of BJ's Wholesale Club (BJ): 15.8
- PE ratio for Big Lots (BIG) : 7
Price relative to our valuation:
- BJ's Wholesale Club (BJ): 7.8% overvalued based on our latest stock valuation
- Big Lots (BIG): 13.1% undervalued based on our latest stock valuation
So BJ's Wholesale Club has a stockholders deficit, and Big Lots has a relatively low price/stockholders equity per share ratio. BJ's Wholesale is trading a higher PE ratio than Big Lots. For the cash as percentage of total assets Big Lots (BIG) cash makes up a far greater portion of their total assets than that of BJ's Wholesale Club. BJ's Wholesale Club is trading at a premium to our stock price valuation while Big Lots is trading at a discount to our latest valuation of the group.. Based on current stock prices, BJ's Wholesale is overvalued by almost 8% while Big Lots is undervalued by 13.1%.
Based on all the above if we have to buy one of these two retail giants we rate the stock of Big Lots (BIG) hands down as the WINNER in the battle between BJ's Wholesale stock vs Big Lots