Well, well. It seems investors weren't the only ones impressed with the Q1 earnings report that BJ's Wholesale Club
According to a press release issued yesterday, the fact that investors had already bid the firm's shares up 2% on news of better-than-expected earnings didn't dissuade BJ's board from authorizing an additional $100 million to the repurchase program. Having already spent $17 million to buy back shares during the first quarter, the company was left with $37 million in the kitty by the time of Tuesday's news.
But here's the strange thing. On Tuesday, BJ's said that its Q1 buybacks had left "approximately $37 million remaining under the current authorization." Just a few hours later, on Wednesday, the addition of $100 million to the program brought it to "a total of approximately $133 million ... available for share repurchase." Which raises the question: "Um, where did the other $4 million go?" Could it be that Tuesday's rising share price was caused entirely by BJ's buying its own stock back in the wake of earnings? It's certainly possible.
Am I forgetting something?
Ah, yes. The earnings news! Well, you can get most of the relevant numbers from yesterday's edition of Fool by Numbers. What jumps out at me, though, are the following points:
Quarterly sales were up 7.6% year over year. Meanwhile, gross, operating, and net margins all slid downward a few basis points more -- continuing the trend we examined in Monday's Foolish Forecast. That leaves BJ's still in third place among the BTBBs (the "Big Three Big Box sellers"), and still netting around half the profit on a dollar of revenue that Costco
But even as BJ's GAAP numbers were disintegrating, the company stocked up on some serious cash profits last quarter. A significant liquidation of inventory (down 2% year over year, against the near-8% sales rise) helped to more than triple cash from operations to $59.6 million. Meanwhile, scaled-back capital expenditures allowed more of that cash to flow freely into the firm's coffers. Result: BJ's generated $26.9 million in free cash flow during Q1, more than twice its reported net income under GAAP. To this Fool, that looks like a good reason to buy. I wonder if anyone other than BJ's management is doing that.
What was BJ's stocking last quarter? Find out in: