What happened
BJ's Wholesale Club (BJ 1.15%) shareholders lost ground to the market this week. Their stock was down 11% through Thursday trading, according to data provided by S&P Global Market Intelligence. That's compared to a 1% drop in the S&P 500. The warehouse retailer's stock is now in negative territory for 2023, down 5% while the wider market is up 8%.
BJ's weekly drop came as investors digested the company's Q1 earnings update.
So what
BJ's on Tuesday revealed that comparable-store sales growth remained in solidly positive territory in the selling period that ran through late April. Comps were up 6%, putting it ahead of peer Costco Wholesale but behind Walmart's Sam's Club. The growth reflected higher customer traffic and market share gains in the ultra-competitive retailing industry. That success "demonstrate[ed] the power of our business model and the warehouse club channel," CEO Bob Eddy said in a press release.
Investors chose to focus instead on weakening results for the wider industry. BJ's said in a conference call with investors that shoppers are becoming more cautious in their spending, especially in consumer discretionary products. Declines here pushed Costco's comps into negative territory for the period and are likely to keep pressuring the industry in 2023.
Now what
Yet BJ's is winning market share and improving its profit margins in this tougher environment. Those are excellent signals that the business will boost annual earnings over time. The warehouse retailing industry is resilient to recessions, too, as shoppers prioritize value and consumer staples products.
Meanwhile, BJ's is focused on building customer loyalty, which is evident in the company's 90% renewal rate. "Membership is, by far the most important product we sell," Eddy told investors. Success here should continue powering positive results for growth stock investors even if short-term returns are volatile.
