There's no end in sight yet for BJ's Wholesale Club's (BJ -0.97%) growth spike. In an earnings report on Thursday, the warehouse retailer announced accelerating expansion trends that kept it near the top of a competitive industry niche.

And while management declined to issue a detailed outlook for the holiday season or for the 2022 fiscal year ahead, there are many reasons for investors to expect solid returns from this business.

Let's dive right in.

An employee restocks fresh vegetables.

Image source: Getty Images.

Sales are spiking

The economic growth cycle continued to lift the business as shoppers spent freely and inflation lifted prices. But BJ's Wholesale capitalized on that positive selling environment in a way that set it apart from peers.

Comparable-store sales gains accelerated to a 24% two-year rate compared to 21% last quarter. That result was better than the latest figures put up by Walmart's Sam's Club and Costco Wholesale.

It reflects market share growth across key categories like the online niche. "Our growth flywheel is spinning faster than it has in a long time," CEO Bob Eddy said in a press release.

Cash is flowing

Pre-tax income fell, year over year, to $158 million from $164 million. That key earnings figure is also down year to date as BJ's Wholesale invests more cash in the business and on employee wages.

Underlying profit trends are strong, though. The chain saw a solid boost in fee income thanks to its expanding subscriber base. These members are renewing at near-record rates, too.

Meanwhile, supply chain challenges didn't pinch profits by much. Gross profit margin dropped by just 0.2 percentage points despite higher transportation and freight costs. BJ's Wholesale offset that slump, and the pressure from inflation, by selling more high-margin products like consumer electronics.

Overall earnings per share rose 5% to $0.92. That result beat most investors' expectations by roughly $0.10 per share. 

The short-term outlook

Eddy and his team declined to issue an outlook for the holiday season ahead, but investors should see a record shopping period on the way. Besides the rising customer traffic trends through late October, the best indicator of that growth ahead is the retailer's improving renewal rates.

Finishing 2021 on a strong note is just the start for this business, which has yet to establish the type of national footprint that allows peers like Costco to maintain their price leadership.

Management is hoping to use the growing cash production to launch new warehouses to build on the current 222 stores spread across just 17 states. Costco counts more than double that number in the U.S., with many of those stores having built a loyal following over several decades.

It will be a huge challenge for BJ's Wholesale to replicate part of that success. But its market share gains in 2020 and 2021 imply that there's room for a bigger platform even in this highly competitive retailing space.