Please ensure Javascript is enabled for purposes of website accessibility

What to Look for in BJ's Wholesale Club's Earnings

By Demitri Kalogeropoulos – Aug 14, 2021 at 11:00AM

Key Points

  • Sales will likely fall compared to the soaring results from a year ago.
  • BJ's is gaining market share and aiming to launch stores in new markets.
  • The stock's returns will depend on the chain's ability to keep expanding its footprint in this crowded industry.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The warehouse giant has some big questions to answer for investors this week.

BJ's Wholesale Club Holdings (BJ 0.71%) investors are in for a volatile trading week. The stock has rallied in 2021, but that surge will be tested when the retailer announces its latest earnings results on Aug. 18.

Expectations are high heading into the report, even though growth is sure to slow compared to a year earlier when people were busy stocking their pantries in the early days of the pandemic. So, let's take a look at the metrics that might keep BJ's running ahead of the market, and of peers like Walmart (NYSE: WMT) and Costco Wholesale (NASDAQ: COST).

An employee stocks fresh vegetables.

Image source: Getty Images.

Market share

BJ's gained more than its fair share of new shoppers during the pandemic, with sales jumping 17% in fiscal 2020, which ends in late January. Its rivals have slightly different fiscal years, but Walmart's Sam's Club grew at a 12% rate over the comparable period. Costco's gains were closer to 14%.

BJ's comparable-store sales and customer traffic numbers will be judged against the latest results from these retailing giants for signs of continued market share growth. Walmart posts its updated numbers two days before BJ's announcement. Costco already revealed solid sales gains for the month of July with comps landing at 8%. Look for CEO Bob Eddy and his team to highlight BJ's two-year growth numbers this week. The warehouse giant's recent expansion pace by that metric landed at 22%.

Passing along higher prices

BJ's said back in May that it was well positioned to weather industry challenges like inflation, supply chain stresses, and slowing growth. The early 2021 profitability pinch was just a temporary swing, management predicted.

BJ Operating Margin (TTM) Chart

BJ Operating Margin (TTM) data by YCharts

Investors can judge that forecast against BJ's profit margins in Wednesday's report. Higher membership fee income should help it keep operating margin at 4% of sales or higher, keeping BJ's in good company compared to industry peers. Success on this score is crucial to fund management's greater ambitions of establishing a national selling footprint over time.

Looking ahead

That growing footprint is a major selling point for the stock. BJ's is planning to open six new warehouses in fiscal 2021, including two in brand-new markets for the retailer. The company currently operates roughly 220 warehouses across 17 states. Costco operates 562 locations across the entire country.

BJ's ability to quickly ramp up toward a national footprint will depend on its ability to keep growing in this competitive niche. While the chain is likely to announce a sharp slowdown this quarter when compared to year earlier, its sales are still running much higher than they were in mid-2019. And BJ's has a bigger cash holding today than it did before the pandemic struck.

These assets should be valuable for the company's next growth phase that involves consolidating recent market share wins while reaching out into new markets that put it in more direct competition with established retailing rivals.

Demitri Kalogeropoulos owns shares of Costco Wholesale. The Motley Fool owns shares of and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

BJ's Wholesale Club Holdings, Inc. Stock Quote
BJ's Wholesale Club Holdings, Inc.
$73.50 (0.71%) $0.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.