BJ's Wholesale Club (BJ -1.55%) released its earnings for the first quarter of its fiscal 2024 on May 23. The membership-only warehouse club reported total revenue of $4.92 billion, surpassing analysts' consensus estimate of $4.86 billion by 1.3%. However, despite the revenue beat, the company faced challenges with declining operating income and increased expenses.
For the 13-week period that ended May 4, BJ's showed membership growth and robust digital sales, but its bottom line was weighed down by the higher labor and occupancy costs associated with its expanded store footprint.
| Metric | Fiscal Q1 2024 | Fiscal Q1 2024 Analyst Estimate | Fiscal Q1 2023 | % Change |
|---|---|---|---|---|
| Revenue | $4.92 billion | $4.86 billion | $4.72 billion | 4.1% |
| Net sales | $4.81 billion | N/A | $4.62 billion | 4% |
| Adjusted EPS | $0.85 | $0.85 | $0.85 | 0% |
| Operating income | $161 million | N/A | $187 million | (13.9%) |
| Net income | $111 million | N/A | $116 million | (4.4%) |
Source: Company data from company. Analyst estimates provided by FactSet.
Quarterly highlights
BJ's Wholesale Club offers a wide range of products, including groceries, electronics, furniture, and gas. It thrives on a value proposition that relies on providing significant savings to its members through competitive pricing and private-label brands. Recently, BJ's has focused on expanding its digital capabilities and enhancing its omnichannel presence to stay competitive in the rapidly evolving retail landscape.
It consistently focuses on improving membership renewal rates and digital sales, which have shown strong performance in recent quarters.
During the quarter, BJ's Wholesale Club's revenues rose 4.1% year over year, and net sales were up 4%. The company saw notable growth in membership fee income, which rose 8.6% to $111.4 million -- a testament to its robust member engagement.
Comparable club sales increased by 1.6% year over year, driven by a 0.6% rise (excluding gasoline sales). Digital sales also saw a significant 21% comps surge.
On the downside, operating income decreased by $26 million, primarily due to increased selling, general, and administrative expenses, which rose to $721.8 million from $689.3 million in the prior-year period. That increase was largely driven by new club openings, which in turn increased its labor and occupancy costs. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also declined 6% to $236.4 million.
The retail's merchandise gross margin rate decreased by 50 basis points, a decline management attributed to lower ancillary income.
"During the first quarter, we delivered strong increases in membership, traffic, and unit volumes," said Chairman and CEO Bob Eddy. "This resulted in revenue growth and market share gains in our clubs and at our gas stations."
Notable in this quarter's performance were several one-time financial impacts, including an acquisition and related costs. These elements impacted the financial metrics, but the deals are expected to contribute positively to the bottom line in the long term.
Additionally, income tax expenses declined to $35.8 million from $56.1 million, largely due to higher tax benefits from stock-based compensation. The company also saw an increase in cash flow from operating activities, from $119.1 million in Q1 fiscal 2023 to $200.8 million in Q1 fiscal 2024.
Looking ahead
Management maintained its previous outlook for fiscal 2024, and said it's focused on sustaining traffic, unit volumes, and market share. BJ's plans to continue expanding its footprint, with 12 new clubs and several gas stations slated to open the year. It also aims to further enhance its digital and omnichannel capabilities to drive growth.
