BJ’s Wholesale Club upheld a double-digit growth pace in net and comparable sales in its fiscal 2020 third quarter, lifting per-share earnings 15 cents above Wall Street’s high-end estimate.
For the quarter ended Oct. 31, net sales came in at $3.65 billion, up 15.7% from $3.15 billion a year earlier, BJ’s said Thursday. Including membership income growth of 11% to $84.9 million, total revenue climbed 15.6% to $3.73 billion. The warehouse club chain’s member base is up 12% from a year ago, reflecting a net gain of 630,000 new members.
Comparable-club sales rose 14.1% year over year and were up 18.5% excluding fuel.
“We remain on trend. Members are consolidating their trips and buying bigger baskets in response to the pandemic and searching for savings, given broad economic anxiety. Our industry-leading value, bulk sizes and broad category participation work exceptionally well in these times,” President and CEO Lee Delaney (left) told analysts in a conference call on Thursday.
“As a result, we have gained considerable share. More than half our growth was driven by share gains based on IRI data. Furthermore, our growth outpaced the market by more than twofold, and we gained share in more than 90% of the categories we track,” Delaney said. “For example, our perishables business outpaced the market by more than two times, and our nonedible grocery business grew at eight times the rate of the market. Our strongest share gains occurred outside of our core Northeast geography, as more people discovered our relevance. These share gains outside of our core markets further support our confidence that we can successfully expand our reach and assert our relevance far beyond the Northeast.”
Comp-sales trends have actually picked up as BJ’s moved into the fourth quarter, signaling that the warehouse club chain will be well-positioned coming out of the COVID-19 crisis, according to Chief Financial Officer Robert Eddy.
“We continue to see more members tenured and new shoppers in our clubs expanding their baskets and penetrating all categories. These trends were consistent across our geographies. We saw consistently strong merchandise comp sales during the quarter. Each month’s comp was within 100 basis points of our quarterly comp. October’s merchandise comp was slightly over 18% and strengthened towards the end of the month. The consistency of our monthly performance coupled with the expanded market share gives us confidence that the underlying strength we have gained will outlast the trends and benefits of the pandemic,” Eddy said in the call.
“Merchandise comps have continued to strengthen since the end of the quarter. In the first three weeks of November, we’re running north of 20%, with strength across almost all categories as we continue to see increased food and home trends and consumer home investments, in addition to earlier holiday shopping,” he explained. “But we are pleased with our early fourth-quarter comps. It’s difficult for us to predict how the rest of the quarter will play out, given the number of significant uncertainties, such as inventory, availability and member behavior during the holidays.”
BJ’s saw digital sales jump about 200% year over year in the third quarter, continuing momentum from respective increases of 300% and 350% in the second and first quarters.
“Our biggest gains came in channels where economics are most attractive, with buy-online-pickup-in-club, or BOPIC, and same-day delivery representing three quarters of the growth. The growth in our digital platforms continues to surpass our expectations. In the last nine months we have grown by more than four times all of last year's growth,” Delaney said. “This quarter, we expanded BOPIC to include curbside service including fresh and frozen grocery items chainwide. Although still early, results from this expanded offering have been very promising. For example, roughly 40% of our BOPIC orders post-launch were delivered curbside. We will continue to aggressively invest in digital platforms, given their increased relevance in our competitively advantaged economics. We believe shift to digital will bode well for us on the top and bottom line.”
Eddy noted that BJ’s holds an edge with its online fulfillment model. “Our economics are advantaged versus our peers. We operate a limited-SKU warehouse environment with significantly higher average tickets, allowing us to be much more efficient,” he told analysts. “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. Additionally, digitally engaged members appear to shop much more than those that only interact with us through traditional means.”
An accelerated reset of BJ’s food business in the first half of the year, including more healthy and organic options, also is bearing fruit. Grocery comp sales grew 19% in the third 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. As Lee noted, our perishables division grew more than twice as fast as the rest of the market. In edible grocery, we saw robust growth in beverages and salty snacks and grew twice as fast as the rest of the market in those categories as well,” Eddy said.
“In our nonedible grocery division, we continue to see strong growth in paper products, cleaning supplies, and health and beauty items. Our growth outpaced the market by 20 times in health and beauty, and by a little bit more than twofold in household goods and cleaning,” he added. “Our in-stock levels improved throughout the quarter, as our team worked tirelessly with both existing and new suppliers.”
On the earnings side, BJ’s turned in third-quarter net income of $122.8 million, or 88 cents per diluted share, compared with $55.1 million, or 40 cents per diluted share, a year ago. Excluding debt paydown charges and write-offs, a loss on a cash-flow hedge and tax adjustments, adjusted net earnings were $128.5 million, or 92 cents per diluted share, versus $56.6 million, or 41 cents per diluted share, in the prior-year period.
Analysts, on average, had forecast adjusted earnings per share of 64 cents, with estimates ranging from a low of 50 cents to a high of 77 cents, according to Refinitiv/Thomson Reuters.
Westborough, Mass.-based BJ’s closed out the quarter with 219 clubs and 149 BJ’s Gas stations in 17 Eastern states, the same club count and five more fuel locations versus a year earlier.
“Our efforts to expand our footprint are progressing well. We remain on track to open two new clubs in New York at the end of this fiscal year, for a total of four this year and as many as six clubs next year. To further expand our reach we are pursuing additional locations in new and existing markets, with a focus on attractive demographics,” Delaney said in the call. “We are pleased with the performance of our news clubs so far, especially from a membership standpoint, where in Michigan our members per club average is 20% better than the chainwide average. We plan to invest aggressively to support our new clubs, given our ability to gain share in new markets and the performance of recent openings, the latter of which continues to run ahead of expectations. All told, we expect greater unit growth to be a multiyear growth factor.”