BJ’s Wholesale Club tallied strong e-commerce sales and beat Wall Street’s per-share earnings forecast for its fiscal 2021 first quarter, despite lackluster comparable-store sales due to the cycling of last year’s sales spike at the onset of COVID-19.
For the quarter ended May 1, BJ’s posted net sales of $3.78 billion, eking out a 1.7% gain from just under $3.72 billion a year earlier, when the warehouse club chain tallied a 21.1% increase amid pandemic-driven panic-buying activity. Membership fee income rose 8.6% to $86.4 million — powered by 8% growth in the member base — and raised overall revenue 1.9% to $3.87 billion, the company reported on Thursday.
Comparable-club sales inched up 0.3% year over year but, excluding fuel, were down 5% for the quarter. BJ’s noted, however, that comp-club sales were up 22% on a two-year stacked basis excluding fuel, including a 27% gain in the 2020 first quarter.
“In February, comps were slightly behind our internal plan,” Chief Financial Officer Laura Felice told analysts in a conference call Thursday morning. “We saw an acceleration in March and April relative to our expectation, as we benefited from stimulus payments, strong member retention and elevated sales in general merchandise categories.”
Comp sales in the grocery category, which accounts for roughly three-quarters of BJ’s overall sales, remain on a healthy growth trajectory, according to Felice.
“Comps in our grocery division were 23% stacked, reflecting a negative 10% comp for the current quarter and a 33% comp in the prior year. As expected, we saw a decline in our grocery and sundries division as we lacked the hype in demand for paper products, cleaning essentials, packaged goods and beverage driven by the onset of the pandemic last March,” she explained. “On a two-year stack basis, we saw robust growth across all divisions, particularly in perishables, where stack comps were in the mid-20% range, and we saw growth in fresh meat, frozen meals and fresh produce. Our general merchandise and services division saw a comp growth of 32%, reflecting a 29% stack comp. Recall that our general merchandise and services division saw a comp decline of about 3% in the prior year as sales of apparel decreased and we turned off our services businesses.”
Digital sales were a first-quarter bright spot, climbing 31% and reflecting two-year stacked comp growth of 381%, incorporating a 350% jump from the 2020 quarter.
“Our digital business allows us to offer convenient access to the tremendous value that we provide every day. Our digitally enabled sales grew by 31% this quarter and 381% on a stack basis, surpassing our elevated expectations,” said President and CEO Robert Eddy, who took over as BJ’s CEO in April following the death of Lee Delaney.
“We are more relevant than we’ve ever been in the digital space, and engagement among our members is most evident through the increased use of our app, which has been downloaded over 5 million times. Approximately a third of our members use our app regularly. On a scale-adjusted basis, our app engagement remains ahead of many of our competitors as we continue to make shopping meaningfully easier and faster,” Eddy said in the call. “Also, our expanded digital fulfillment options continue to resonate with members, as more than half of our BOPIC [buy online, pickup in club] orders were delivered curbside this past quarter. Finally, our plan to enable members to use EBT payment when shopping on BJs.com for in-club pickup and curbside pickup remains on track. Pending state approval, we expect digital EBT payments to become available in all eligible locations in the next few months.”
Felice noted that e-commerce sales drove about 7% of BJ’s 22% stack-to-merchandise comp sales through the first quarter.
“On a stacked basis, we saw robust and strong growth across all of our digital channels, particularly in BOPIC, curbside pickup and same-day delivery. As you know, our digital business is economically advantaged compared to many of our peers, and the bulk of our growth in digital is fulfilled through our clubs. Furthermore, we operate in a warehouse environment with a limited number of SKUs and a higher average ticket, enabling 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,” she said. “Most importantly, the growth across our digital channels highlights our relevance. Digitally engaged members have higher average baskets and make more trips per year than members who shop in-club only. As we’ve said before, generally the more a member shops and spends, the more likely they are to renew.”
Westborough, Mass.-based BJ’s finished the first quarter with 221 warehouse clubs and 151 BJ’s Gas stations in 17 states. On Thursday, the company unveiled plans to open six new clubs in fiscal 2021, including in Seabrook, N.H.; Port Charlotte, Fla.; Commack, N.Y.; South Fayette and Ross Township, Pa.; and Lansing, Mich. The locations in the greater Pittsburgh area and Lansing will mark new markets for BJ’s.
Eddy said in the call that BJ’s may open up to 10 new clubs in fiscal 2022.
“We also expect to open nine gas stations in 2021, followed by a dozen or more gas stations in 2022, which means three-quarters of our clubs will have gas stations by the end of 2022,” he added. “We are excited about our expansion efforts, and our confidence is underpinned by the strong performance we are seeing in our new clubs, particularly in terms of membership gains and renewal rates. In our Michigan clubs and in Pensacola, Fla., first-year retention rates are well above chainwide averages. This furthers our confidence in our expansion efforts as it demonstrates that our brand resonates in new markets.”
On the earnings side, BJ’s recorded first-quarter net income of $81.6 million, or 59 cents per diluted share, compared with $95.7 million, or 69 cents per diluted share, a year ago. Excluding stock-based compensation, a cash-flow hedge loss, debt-related charges and write-offs, severance charges and tax adjustments, net earnings came in at $99.7 million, or 72 cents per diluted share, on an adjusted basis versus $95.7 million, or 69 cents per diluted share, in the 2020 quarter, the company reported.
Analysts, on average, projected adjusted earnings per share of 57 cents, with estimates ranging from 48 cents to 70 cents, according to Refinitiv.
“Overall, we are incredibly proud of the progress we’ve made. Looking ahead, we continue to face uncertainties driven by market factors outside our control, most notably the trajectory of food-at-home consumption and the overall macroeconomic environment,” Eddy told analysts. “In fiscal 2020, we experienced historically high comp sales, and a sizable portion of our performance was driven by pandemic-related shopping particularly the need to buy in bulk and eat at home. As the pandemic fades and consumer behavior evolves, we would expect to give up some of those sales gains that resulted from increased food-at-home consumption.”
Though the post-pandemic return to normalcy “creates some noise” in the rest of fiscal 2021 and into 2022, BJ’s expects its membership trends, optimized and expanded assortment, digital growth and club expansion to drive mid-single-digit, top-line growth going forward, according to Eddy.
“Our confidence has reinforced by a belief that macro trends will work in our favor. We believe that at-home food consumption will reset a little higher than historical levels, as consumers relate to consume food-at-home more than that they did prior to the pandemic,” he said. “Economic uncertainty will continue to increase the focus on value, and demand for convenience will likely remain relevant. Therefore, we expect our unbeatable offering, value and convenience will be a winning formula.”