Shares of BJ's Wholesale Club (NYSE:BJ) were moving higher today after the membership-based club chain posted another strong earnings report in its second quarterly report as a publicly traded company. The news sent the stock up 11.4% as of 12:20 p.m. EST.
BJ's said comparable sales, excluding fuel, increased 1.9% -- a decent clip but weaker than peers like Costco and Sam's Club -- while overall revenue rose 4.3%, to $3.22 billion, which topped estimates of $3.17 billion. Merchandise gross margin increased 60 basis points in the quarter with the help of the company's category profitability improvement program.
Operating income rose 12%, to $90.3 million, and adjusted earnings per share jumped from $0.25 to $0.39 with the help of a lower interest expense and tax rate. That figure beat expectations of $0.34.
CEO Christopher Baldwin said:
We're pleased with our third-quarter performance, which exceeded our expectations for sales and earnings. We continue to execute against our strategic priorities and have now delivered eleven consecutive quarters of improved profitability and five quarters of positive comp sales. We are still in the very early stages of our transformation and have significant opportunities ahead. We are optimistic our approach will deliver benefits to our members, shareholders and team members over the long term.
The company also said it would open two new clubs in Michigan next year, continuing its westward expansion.
Looking ahead, BJ's raised its guidance modestly for the full year, calling for comparable sales of 1.9%-2.1%, up from a previous range of 1.8%-2.1%, and adjusted earnings per share of $1.22-$1.26 compared to previous guidance of $1.17-$1.24.
Costco's success has proven that warehouse clubs are relatively immune to e-commerce, so BJ's should be able to execute on its growth plan of opening 15-20 new clubs over the next five years. If it can deliver comparable-sales growth at the same time, the stock arguably offers value today at a price to earnings (P/E) ratio under 20.
Today's report wasn't outstanding, but given expectations, it was solid enough to warrant a pop, especially after the stock's retreat over the last few months.