BJ's Wholesale Club (BJ) earnings release for the 2nd quarter of their 2021 fiscal year
Category: Stock Market and BJ's Wholesale Club
Date: 21 August 2021 BJ's Wholesale Stock Price: $56.90 Market Capital of BJ's Wholesale (BJ): $7.8 billion We take a look at the 2nd quarter earnings release of their 2021 fiscal year of BJ's Wholesale Club the discount grocery store retailer. For the quarter the group reported revenues of $4.17 billion and net income of $110.9 million
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When I reflect on our impressive performance, it is clear that our progress against our strategic priorities has powered our success. We drove outstanding membership results, expanded our market share and continued to benefit from elevated consumer spending trends - Bob Eddy, President and Chief Executive Officer, BJ’s Wholesale Club"
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
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: $6.39 billion (as at 23 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
Overview of BJ's Wholesale Club's 2nd quarter 2021 earnings
Second Quarter Fiscal 2021 Highlights
- Membership size and quality continues to improve; first-year renewal rates remain at historic levels.
- Total comparable sales increased by 4.0%, reflecting two year stacked comp of 21.2%.
- Comparable club sales, excluding gasoline sales, decreased by 3.4%, reflecting two-year stacked comp of 20.8%.
- Digitally-enabled sales growth was 4%, reflecting two-year stacked comp growth of 304%. Members continue to aggressively adopt new services such as curbside pickup.
- Consistent, robust performance across categories and geographies.
- Earnings per diluted share of $0.80 reflects a 5.3% year-over-year increase.
- Adjusted earnings per diluted share of $0.82 reflects a 6.5% year-over-year growth.
- Net cash provided by operating activities was $310.3 million and free cash flow was $239.7 million for the second quarter of fiscal 2021.
BJ's Wholesale Club's management commentary on their 2nd quarter 2021 earnings
WESTBOROUGH, Mass.--(BUSINESS WIRE)-- BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) (the "Company") today announced its financial results for the thirteen and twenty-six weeks ended July 31, 2021.
"When I reflect on our impressive performance, it is clear that our progress against our strategic priorities has powered our success. We drove outstanding membership results, expanded our market share and continued to benefit from elevated consumer spending trends," said Bob Eddy, President and Chief Executive Officer, BJ’s Wholesale Club. "I am thankful for our team members’ dedication and excellent execution, which continues to enable our success. We have invested into our team members, the value of our membership, our digital infrastructure and physical footprint to continue to accelerate our growth flywheel. With these investments, we are confident that we are well positioned for long-term success."
"When I reflect on our impressive performance, it is clear that our progress against our strategic priorities has powered our success. We drove outstanding membership results, expanded our market share and continued to benefit from elevated consumer spending trends," said Bob Eddy, President and Chief Executive Officer, BJ’s Wholesale Club. "I am thankful for our team members’ dedication and excellent execution, which continues to enable our success. We have invested into our team members, the value of our membership, our digital infrastructure and physical footprint to continue to accelerate our growth flywheel. With these investments, we are confident that we are well positioned for long-term success."
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Additional Highlights:
"Looking ahead, we remain confident our business will continue to thrive and that our solid membership trends, assortment initiatives, enhanced digital capabilities and robust real estate pipeline will drive sustained and strong profitable growth," said Laura Felice, Executive Vice President, Chief Financial Officer, BJ's Wholesale Club. "Given the level of uncertainty associated with the evolution of the pandemic, fiscal 2021 remains difficult to forecast. Our view of the future has improved from last quarter but we will continue to refrain from offering formal detailed guidance."
- Comparable club sales for the second quarter of fiscal 2021 increased 4.0% compared to the second quarter of fiscal 2020. Comparable club sales, excluding the impact of gasoline sales, for the second quarter of fiscal 2021 decreased 3.4% compared to the second quarter of fiscal 2020. Comparable club sales for the first half of fiscal 2021 increased 2.2% compared to the first half of fiscal 2020. Comparable club sales, excluding the impact of gasoline sales, for the first half of fiscal 2021 decreased 4.2% compared to the first half of fiscal 2020.
- Gross profit increased to $763.5 million in the second quarter of fiscal 2021 from $756.4 million in the second quarter of fiscal 2020. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased 30 basis points over the second quarter of fiscal 2020. Merchandise margins benefited from improved private label penetration and the mix of our general merchandise sales, partially offset by increased freight costs and price investments in inflationary categories. Gross profit decreased to $1,490.3 million in the first half of fiscal 2021 from $1,493.1 million in the first half of fiscal 2020. Merchandise gross margin rate, which excludes gasoline sales and membership fee income, increased by approximately 50 basis points over the first half of fiscal 2020. Merchandise margins benefited from the mix of our general merchandise sales, improved private label penetration and continued execution of our category profitability improvement initiatives, partially offset by increased freight costs and price investments in inflationary categories.
- Selling, general and administrative expenses ("SG&A") increased to $598.1 million in the second quarter of fiscal 2021, compared to $590.8 million in the second quarter of fiscal 2020. The increase in SG&A expense in the second quarter of fiscal 2021 was driven by a team member recognition bonus of approximately $8.0 million. SG&A increased to $1,198.0 million in the first half of fiscal 2021 compared to $1,181.2 million in the first half of fiscal 2020. SG&A in the first half of fiscal 2021 included $17.5 million of stock-based compensation expense related to the acceleration of stock awards associated with the passing of Lee Delaney, $2.3 million of severance charges associated with labor reductions that resulted from the realignment of our field operations and $8.0 million associated with a team member recognition bonus.
- Operating income increased to $163.8 million, or 3.9% of total revenues, in the second quarter of fiscal 2021 compared to $163.6 million, or 4.1% of total revenues, in the second quarter of fiscal 2020. Operating income decreased to $290.0 million, or 3.6% of total revenues, in the first half of fiscal 2021 compared to $307.3 million, or 4.0% of total revenues, in the first half of fiscal 2020.
- Interest expense, net, decreased to $16.4 million in the second quarter of fiscal 2021 compared to $20.7 million in the second quarter of fiscal 2020. Interest expense in the second quarter of fiscal 2021 included a $3.2 million release of accumulated other comprehensive income related to the July 2021 payment on the Company’s ABL Facility. Interest expense, net, decreased to $35.7 million in the first half of fiscal 2021 compared to $42.6 million in the first half of fiscal 2020. Interest expense in the first half of fiscal 2021 included an $8.0 million release of accumulated other comprehensive income and $0.7 million expense of deferred financing costs associated with the principal prepayment on the Company's First Lien Term Loan and payment on the ABL Facility. The decrease in interest expense was driven by continued de-levering.
- Income tax expense was $36.4 million in the second quarter of fiscal 2021 compared to income tax expense of $36.2 million in the second quarter of fiscal 2020. The second quarter of fiscal 2021 included a benefit of $3.2 million from excess tax benefits related to stock-based compensation compared to $2.6 million in the second quarter of fiscal 2020. Income tax expense was $61.7 million in the first half of fiscal 2021 compared to income tax expense of $62.4 million in the first half of fiscal 2020. The first half of fiscal 2021 included a benefit of $6.4 million from excess tax benefits related to stock-based compensation compared to $7.1 million in the first half of fiscal 2020.
- Under our share repurchase program, we repurchased 1,054,116 shares of common stock, totaling $49.6 million in the second quarter of fiscal 2021. In the first half of fiscal 2021, we repurchased 1,369,116 shares of common stock, totaling $63.5 million, under such program.
"Looking ahead, we remain confident our business will continue to thrive and that our solid membership trends, assortment initiatives, enhanced digital capabilities and robust real estate pipeline will drive sustained and strong profitable growth," said Laura Felice, Executive Vice President, Chief Financial Officer, BJ's Wholesale Club. "Given the level of uncertainty associated with the evolution of the pandemic, fiscal 2021 remains difficult to forecast. Our view of the future has improved from last quarter but we will continue to refrain from offering formal detailed guidance."
BJ's Wholesale Club (:BJ) stock price chart osince
The image below shows the stock price history of BJ's Wholesale Club (NYSE: BJ) since its listing in June 2018. Since its listing the stock of BJ's Wholesale Club has increased by 117.5%. Not a bad return for investors at all.
The stock of BJ's Wholesale is also trading at a lot closer to its 52 week high of $46.49 than it is to its 52 week low of $18.84 which to us is a clear an indication that short term sentiment and momentum of BJ's Wholesale Club stock is very positive right now
The stock of BJ's Wholesale is also trading at a lot closer to its 52 week high of $46.49 than it is to its 52 week low of $18.84 which to us is a clear an indication that short term sentiment and momentum of BJ's Wholesale Club stock is very positive right now
BJ's Wholesale Club (NYSE: BJ) stock vs Costco Wholesale Corp (NASDAQ: COST) stock
The image below shows the stock price performance of BJ's Wholesale (BJ) and Costco Wholesale (Cost) over the last 3 years. Both are active in the retail/wholesale space primarily in the United States. While they operate in a fairly similar sector their stock price trends are very different. The summary below shows the stock price return of both over the two year period (sorted from best to worst)
The stock of BJ's Wholesale Club has easily outperformed that of Costco over the last 3 years.
- BJ's Wholesale Club (BJ): 117.5%
- Costco Wholesale (COST): 57.2%
The stock of BJ's Wholesale Club has easily outperformed that of Costco over the last 3 years.
BJ's Wholesale Club (BJ) latest stock forecast
So based on the 2nd quarter 2021 earnings report of BJ's Wholesale Club (BJ) and what do we value BJ's Wholesale Club (BJ) stock at? Based on the earnings reported our valuation model provides a target price (full value price) for BJ's Wholesale Club at $53.40 a stock
We therefore believe the stock of BJ's Wholesale Club is slightly overvalued.
We usually recommend long term fundamental or value investors buy into a stock at least 10% below our target price (full value price) which in this case is $53.40. A good entry point into BJ's would therefore be at $48 or below. We expect the stock of BJ's to pull back after its strong run to levels closer to our target price in coming weeks and months.
We therefore believe the stock of BJ's Wholesale Club is slightly overvalued.
We usually recommend long term fundamental or value investors buy into a stock at least 10% below our target price (full value price) which in this case is $53.40. A good entry point into BJ's would therefore be at $48 or below. We expect the stock of BJ's to pull back after its strong run to levels closer to our target price in coming weeks and months.
Next earnings release of BJ's Wholesale Club
It is expected that BJ's Wholesale Club will release its 3rd quarter 2021 earnings towards the end of November 2021