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Why BJ's Wholesale Club Stock Rallied 16% at the Open Today

By Reuben Brewer – Nov 18, 2021 at 10:49AM

Key Points

  • BJ's beat analyst expectations, leading to a nice price gain. But there's more good news than that to digest today.

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Shares of the membership-based retailer got a big boost from earnings. Here's a quick look at why.

What happened

Shares of BJ's Wholesale Club (BJ 0.17%), a membership-based retailer, rose just over 16% in the first half hour of trading on Nov. 18. The big news was the company's premarket third-quarter 2021 earnings announcement. Investors clearly liked what they saw.

So what

BJ's top line in the third quarter came in at $4.26 billion, up 14.3% from the same quarter in 2020. However, because you need to buy a membership to get into one of its stores, the revenue number really needs to be broken into two categories. Actual product sales rose 14.4% year over year, while membership fees inched up 7.7%. The first number highlights that people are out shopping and BJ's is benefiting. The second number suggests that its business model is strong, with the company's release stating, "Membership size and quality continues to improve; first-year renewal rates remain at historic levels." Both are clearly very good news for the company.

A person with a full shopping cart in front of an open car trunk.

Image source: Getty Images.

On the bottom line, the retailer's earnings came in at $0.92 per share in the third quarter of 2021. That's up roughly 4.5% year over year and a decent showing given the broader inflation and logistics headwinds facing the economy. Better yet, analysts had been expecting $0.81 per share, meaning BJ's beat Wall Street's projections by a wide margin. Investors tend to like that type of thing and reacted accordingly. In other good news, comparable store sales were higher by a solid 5.7%, digitally enabled sales rose 44%, and the board authorized a $500 million share repurchase program. BJ's is doing well across the board right now.

Now what

Although today's gain was pretty big, BJ's business isn't usually what you'd consider exciting. However, it is proving to be pretty reliable. Notably, membership revenue can provide support to the top and bottom lines when times do get tough, so there's material resiliency here. For a long-term investor, it might be worth taking some time to learn about BJ's and, despite a good run over the past year (it's up twice as much as the S&P 500 index), at least considering putting it on your wish list.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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