Foolish Forecast: BJ's Big News Bonanza

First, you blew out earnings in August. Then you proceeded to join with Costco (Nasdaq: COST  ) in eclipsing Wal-Mart (NYSE: WMT  ) in the September sales race. BJ's Wholesale Club (NYSE: BJ  ) , how will you surprise us when you report Q3 earnings tomorrow morning?

What analysts say:

  • Buy, sell, or waffle? Sixteen analysts follow BJ's, giving it five buy ratings, 10 holds, and a sell. Our Motley Fool CAPS community agrees with the lonely analyst recommending a sell: The stock receives only one out of a possible five stars in CAPS.
  • Revenues. On average, analysts expect to see sales grow 7% to $2.16 billion.
  • Earnings. Profits are predicted to rise twice as much to hit $0.32 per share.

What management says:
Like everyone else in retail-land, BJ's reported its October sales on Nov. 8 -- and it was good news once again. Total sales for the month increased 9.2% from October of last year, with same-store sales rising 4.8%. These results helped to pull total sales for the quarter up to $2.12 billion, with comps averaging 3.4% better than last year.

What management does:
But it's not all champagne boxes and caviar-in-bulk at BJ's. Margins may not be falling any longer, but they're not rising either.

Margins

4/06

7/06

10/06

2/07

5/07

8/07

Gross

10.5%

10.4%

10.4%

10.1%

9.9%

9.9%

Operating

2.7%

2.6%

2.4%

1.9%

1.9%

1.9%

Net

1.6%

1.5%

1.4%

0.8%

0.8%

0.9%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

The Fool says:
We've seen that growth is accelerating as the year progresses, but what kind of growth? BJ's confided that in Q3, foot traffic in its stores declined 1%. How did sales grow with fewer customers? The customers who showed up spent 5% more per visit, on average, than in October 2006. Also interesting, food sales grew 6% in Q3.

BJ's is already the smallest in terms of revenue among its gigantic competitors, Costco and Wal-Mart's Sam's Club. Fellow Fool Anders Bylund recently noted that BJ's has experienced negative year-over-year EBIT growth, and the fact that the company is having trouble attracting new customers isn't helping. Shoppers may spend more on groceries on those occasions when they do come in, but that could be attributed to the fact that BJ's is passing the rising cost of food onto customers.

What was BJ's stocking last quarter? Find out in:


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