Robust grocery and digital sales helped propel BJ’s Wholesale Club to double-digit net and comparable-club sales growth for its 2020 fourth quarter and fiscal year.
BJ’s said Thursday that net sales rose 13.7% to $3.86 billion from $3.39 billion in the quarter ended Jan. 30. Membership fee income climbed 11% to $86.1 million. Comparable-club sales were up 13% year over year and, excluding fuel, advanced 15.9%, the Westborough, Mass.-based warehouse club chain reported.
For fiscal 2020, BJ’s totaled net sales of $15.1 billion, up 17.1% from $12.89 billion in 2019. Income from membership fees gained 10.2% to $333.1 million, boosted by 80,000 net new members in the fourth quarter plus higher retention and first-year renewal rates and an increase in higher-tier membership penetration. Full-year comparable-club sales grew 15.9% overall and 21.3% excluding gasoline.
“From a financial perspective, we delivered industry-leading results this past year,” President and CEO Lee Delaney told analysts in a conference call on Thursday. “In addition to the great performance, we made transformational progress on each of our long-term strategic pillars — namely, growing and retaining our membership, delivering value with merchandising and marketing, improving convenience with digital and strategically expanding our footprint.”
Digital sales escalated 168% in the fourth quarter, with growth of about 255% for the full 2020 fiscal year.
“The centerpiece of our digital strategy is our recently upgraded app, which continues to resonate strongly with our members. Our app delivers real utility, including personalized promotions, improved shopping experiences and an efficient gateway to our fulfillment options,” Delaney said. “Total app downloads exceeded 5 million, compared to a little over 2 million last year, with roughly 30% of our membership regularly using the app compared to 12% last year. Our app receives a higher rating than many of our peers, and we have a robust roadmap to further enhance it with new features that deliver convenience. On a scale-adjusted basis, our digital app engagement appears ahead of many of our competitors, as we’re making shopping meaningfully easier and faster.”
BJ’s also is seeing rising member uptake of buy-online-pickup-in-club (BOPIC) service. The retailer launched curbside pickup in the second quarter and expanded the service to include fresh and frozen foods in the third quarter.
And on Thursday, BJ’s announced that it can now accept electronic benefit transfer (EBT) payments for Supplemental Nutrition Assistance Program (SNAP) purchases via BJs.com for in-store and curbside pickup orders in Florida and North Carolina. BJ’s partnered with the U.S. Department of Agriculture’s Food and Nutrition Service (FNS) and Worldpay from FIS, a financial technology provider for merchants, to add SNAP EBT to BJs.com as part of the SNAP Online Purchasing Pilot.
“More than 50% of our BOPIC orders in the fourth quarter were delivered curbside,” Delaney said. “In recent weeks, we began the rollout of a multi-phase plan to enable our members to use EBT payment when shopping on bjs.com for in-club pickup and curbside pickup. By spring 2021, we plan to have this payment option available to all locations and states participating in the SNAP Online Purchasing Pilot.”
Digitally enabled sales fueled about 5 percentage points of BJ’s 16% merchandise comp-sales growth in the fourth quarter, while BOPIC, curbside and same-day delivery services drove more than 80% of digital sales growth, according to Chief Financial Officer Robert Eddy.
“Our economics are advantaged versus many of our peers, and the concentration of digital orders being fulfilled by our clubs furthers that thought,” Eddy said in the call. “We operate a limited-SKU warehouse environment with a higher average ticket, allowing us to be more efficient. BOPIC and curbside sales tend to skew towards bigger baskets, and same-day delivery sales have the same margins as traditional sales in our clubs.” Digitally engaged members shop more categories, have 30% larger average baskets and make an average of five more shopping trips per year than members who only shop in-club, he added.
Delaney noted that BJ’s has “strengthened our real estate pipeline considerably, enabling us to accelerate the pace of new club openings,” with up to six new clubs in 2021 after four new locations in 2020. The chain currently operates 221 clubs and 151 BJ’s Gas stations in 17 states.
“Even more exciting is that we can see a path to 10 more clubs in 2022. This progress is underpinned by the performance of our newest clubs, where we are gaining market share and driving membership growth,” he said. “At the two clubs we opened in the first half of 2020 — Chesterfield, Mich., and Pensacola, Fla. — the membership per club averages 20% higher than the chain. And in our Michigan clubs, first-year retention rates are well above chainwide averages. We believe we have cracked the code on successfully opening new clubs and will invest aggressively to grow share in an expanded market.”
Among BJ’s merchandise categories, grocery comp sales rose 18% in the fourth quarter. “We saw robust comps across all categories, most notably in perishables, where we saw strong growth in fresh meat, frozen meals and fresh produce,” Eddy said. “In edible grocery, beverages and salty snacks grew nicely. And in our non-edible grocery division, paper products, cleaning supplies and wellness solutions led the way.”
In food segments, Eddy noted that BJ’s is “extremely pleased” with share gains in new categories such as better-for-you snacks and prepared foods, which respectively grew at six times and nine times the rate of market growth.
“We continue to focus on improving our perishables assortment, enabling us to grow twice as fast as the market, with strong share gains in dairy, fresh produce and frozen meals this past quarter,” he said.
On the earnings side, BJ’s more than doubled its net income in the fiscal 2020 fourth quarter, which rose to $95.9 million, or 69 cents per diluted share, from $41.8 million, or 30 cents per diluted share, a year ago. Full-year net earning totaled $421 million, or $3.03 per diluted share, compared with $187.2 million, or $1.35 per diluted share in fiscal 2019.
Adjusted earnings for the quarter were $97.2 million, or 70 cents per diluted share, versus $55.1 million, or 40 cents per diluted share, in the prior-year period. Fiscal 2020 adjusted net income came in at $429 million, or $3.09 per diluted share, up from $203.4 million, or $1.46 per diluted share in 2019.
Analysts, on average, had projected fourth-quarter 2020 adjusted earnings per share of 67 cents, with a range of 57 cents to 93 cents, according to Refinitiv. Wall Street’s consensus estimate for the full year was adjusted EPS of $3.05, with estimates running from $2.89 to $3.31.
Due to the ongoing impact of the COFID-19 pandemic, and the cycling of large comparable-club sales gains in 2020, the fiscal 2021 forecast remains unclear, Eddy told analysts. “Our pre-COVID algorithm included very low single-digit top-line growth. While a return towards normal may temporarily cloud the picture, we expect membership trends and our progress on our real estate pipeline to power our revised algorithm that includes mid-single-digit top-line growth in the future,” he said.
Analysts project BJ’s fiscal 2020 adjusted EPS at $2.68, with estimates ranging from $2.42 to $3.00, according to Refinitiv.
“These uncertainties lead to a range of possible scenarios for 2021,” Delaney said. “Our expectation is that current trends will continue for at least the first half of the year but may change in the second half as vaccine distribution expands and life looks a little more normal again. Should the public health situation fail to materially improve in our markets, we would expect a longer period of elevated food-at-home consumption, driving our sales further. Under any scenario, we expect our membership sales and profitability to be well ahead of our historical plans.”
A bigger retail footprint will be a growth linchpin for BJ's going forward, according to Jefferies analyst Stephanie Wissink. "Increasing new units from one per year to 10-plus per year beginning in fiscal 2022 remains a key growth driver, especially with lapping pandemic-driven gains and a fundamental complement versus other retail models in the public market," she said in a research note on Thursday. "The company added four new clubs in fiscal 20 and expects to add six in fiscal 2021, with one in the first half and the remainder in Q4, including in the long-awaited Pittsburgh market. New units will be a mix of in-fill and greenfield, but generally moving westward, and management will prioritize getting new units built as quickly as possible, with flexibility on owning versus leasing."
*Editor's Note: Article updated with analyst comment.