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Category: Stock Market and BJ's Wholesale Club
Date: 23 August 2020 BJ's Wholesale Stock Price: 46.08 We take a look at the 2nd quarter earnings release of their 2020 fiscal year of BJ's Wholesale Club the discount grocery store retailer. Revenues increased by 18.3% for quarter compared to the same quarter of the previous year and the group reported net income of $106.6 million for the quarter.
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We continue to be extremely grateful for the dedication of our team members, who have exemplified our core values and continue to serve our members and communities during these difficult times -Lee Delaney, 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 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
- 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
- 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
BJ's Wholesale Club's management commentary on their 2nd quarter 2020 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 August 1, 2020.
“We continue to be extremely grateful for the dedication of our team members, who have exemplified our core values and continue to serve our members and communities during these difficult times” said Lee Delaney, President and Chief Executive Officer, BJ’s Wholesale Club. "We delivered another remarkable quarter with strong comp growth and record profitability. Our business has been transformed and strengthened in the last six months by every measure. We are extremely well positioned to continue to win as we invest in digital capabilities, membership, assortment, marketing and geographic expansion to further accelerate this transformation."
- Comparable club sales, excluding gasoline sales, increased by 24.2%, including digitally enabled sales growth of over 300% for the second quarter of fiscal 2020.
- Income from continuing operations increased by 96.5% year-over-year to $106.7 million, for the second quarter of fiscal 2020.
- Adjusted EBITDA increased by 41.6% year-over-year to $216.9 million, for the second quarter of fiscal 2020.
- Earnings per diluted share of $0.76, reflects a 94.9% year-over-year growth.
- Adjusted earnings per diluted share of $0.77, reflects 97.4% year-over-year growth.
- Net cash provided by operating activities was $733.7 million and free cash flow was $654.8 million, for the first half of fiscal 2020.
- Company recognizes dedication of BJ's team members and invests $31.4 million and $82.7 million in wages and bonuses, quarter to date and year to date, respectively.
“We continue to be extremely grateful for the dedication of our team members, who have exemplified our core values and continue to serve our members and communities during these difficult times” said Lee Delaney, President and Chief Executive Officer, BJ’s Wholesale Club. "We delivered another remarkable quarter with strong comp growth and record profitability. Our business has been transformed and strengthened in the last six months by every measure. We are extremely well positioned to continue to win as we invest in digital capabilities, membership, assortment, marketing and geographic expansion to further accelerate this transformation."
Comparable club sales for the second quarter of fiscal 2020 increased 17.2%, compared to the second quarter of fiscal 2019. Comparable club sales, excluding the impact of gasoline sales, for the second quarter of fiscal 2020 increased 24.2% compared to the second quarter of fiscal 2019. Comparable club sales for the first half of fiscal 2020 increased 18.5%, compared to the first half of fiscal 2019. Comparable club sales, excluding the impact of gasoline sales, for the first half of fiscal 2020 increased 25.6% compared to the first half of fiscal 2019.
Operating income increased to $163.6 million, or 4.1% of total revenues in the second quarter of fiscal 2020, compared to $98.7 million, or 3.0% of total revenues in the second quarter of fiscal 2019. Operating income in the second quarter of fiscal 2019 included offering costs of $0.7 million. Operating income increased to $307.3 million, or 4.0% of total revenues in the first half of fiscal 2020, compared to $169.4 million, or 2.6% of total revenues in the first half of fiscal 2019. Operating income in the first half of fiscal 2019 included charges related to offering costs of $1.9 million.
Interest expense, net, decreased to $20.7 million in the second quarter of fiscal 2020, compared to $26.8 million in the second quarter of fiscal 2019. Interest expense in the second quarter of fiscal 2020 included $1.3 million write-off of deferred fees and the original issue discount associated with the July 2020 partial payoff of our first lien term loan facility (the "First Lien Term Loan"). Interest expense, net, decreased to $42.6 million in the first half of fiscal 2020, compared to $54.6 million in the first half of fiscal 2019. The decrease in interest expense was driven by continued de-levering.
Under our share repurchase program, we repurchased 924,282 shares of common stock, totaling $34.1 million in the second quarter of fiscal 2020. In the first half of fiscal 2020, we repurchased 1,099,282 shares of common stock, totaling $38.1 million, under such program.
Operating income increased to $163.6 million, or 4.1% of total revenues in the second quarter of fiscal 2020, compared to $98.7 million, or 3.0% of total revenues in the second quarter of fiscal 2019. Operating income in the second quarter of fiscal 2019 included offering costs of $0.7 million. Operating income increased to $307.3 million, or 4.0% of total revenues in the first half of fiscal 2020, compared to $169.4 million, or 2.6% of total revenues in the first half of fiscal 2019. Operating income in the first half of fiscal 2019 included charges related to offering costs of $1.9 million.
Interest expense, net, decreased to $20.7 million in the second quarter of fiscal 2020, compared to $26.8 million in the second quarter of fiscal 2019. Interest expense in the second quarter of fiscal 2020 included $1.3 million write-off of deferred fees and the original issue discount associated with the July 2020 partial payoff of our first lien term loan facility (the "First Lien Term Loan"). Interest expense, net, decreased to $42.6 million in the first half of fiscal 2020, compared to $54.6 million in the first half of fiscal 2019. The decrease in interest expense was driven by continued de-levering.
Under our share repurchase program, we repurchased 924,282 shares of common stock, totaling $34.1 million in the second quarter of fiscal 2020. In the first half of fiscal 2020, we repurchased 1,099,282 shares of common stock, totaling $38.1 million, under such program.
BJ's Wholesale Club (NYSE:BJ) stock price history
The image below, obtained from Google shows the stock price history of BJ's Wholesale Club (NYSE: BJ) since its listing in June 2018. At its listing/IPO it was trading at around $22.00 a stock and its currently trading at $46.08 in just over 2 years later. That's a 109.5% return provided by BJ's Wholesale Club since its listing date.
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 2 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 2 years.
- BJ's Wholesale Club (BJ): 79.93%
- Costco Wholesale (COST): 17.86%
The stock of BJ's Wholesale Club has easily outperformed that of Costco over the last 2 years.
Recent coverage BJ's Wholesale Club
The extract below touched on BJ's Wholesale the day it released its latest earnings results, as obtained from MarketWatch.com
Shares of BJ's Wholesale Club Holdings Inc. BJ, +3.64% rallied 1.4% in premarket trading Thursday, after the membership-based warehouse retailer reported fiscal second-quarter profit and sales that rose above expectations, as digitally enabled sales soared more than fourfold amid the COVID-19 pandemic. Net income for the quarter to Aug. 1 rose to $106.6 million, or 76 cents a share, from $54.5 million, or 39 cents a share, in the year-ago period. Excluding non-recurring items, adjusted earnings per share came to 77 cents, above the FactSet consensus of 60 cents. Total revenue grew 18.2% to $3.95 billion, beating the FactSet consensus of $3.73 billion, as same-store sales surged 24.2% to beat expectations of a 15.5% rise. Digitally enabled sales grew over 300%. The stock has gained soared 90.9% year to date through Wednesday, while the SPDR S&P Retail ETF XRT, +0.36% has rallied 13.8% and the S&P 500 SPX, +0.34% has advanced 4.5%.
Read the full article here
Shares of BJ's Wholesale Club Holdings Inc. BJ, +3.64% rallied 1.4% in premarket trading Thursday, after the membership-based warehouse retailer reported fiscal second-quarter profit and sales that rose above expectations, as digitally enabled sales soared more than fourfold amid the COVID-19 pandemic. Net income for the quarter to Aug. 1 rose to $106.6 million, or 76 cents a share, from $54.5 million, or 39 cents a share, in the year-ago period. Excluding non-recurring items, adjusted earnings per share came to 77 cents, above the FactSet consensus of 60 cents. Total revenue grew 18.2% to $3.95 billion, beating the FactSet consensus of $3.73 billion, as same-store sales surged 24.2% to beat expectations of a 15.5% rise. Digitally enabled sales grew over 300%. The stock has gained soared 90.9% year to date through Wednesday, while the SPDR S&P Retail ETF XRT, +0.36% has rallied 13.8% and the S&P 500 SPX, +0.34% has advanced 4.5%.
Read the full article here
BJ's Wholesale Club (NYSE: BJ) latest stock valuation
So based on the 2nd quarter 2020 earnings report of BJ's Wholesale Club (NYSE: 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 $42.90 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 $42.90. A good entry point into BJ's would therefore be at $38.60 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 $42.90. A good entry point into BJ's would therefore be at $38.60 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 2nd quarter 2020 earnings towards the end of August 2020