BJ’s Wholesale Club Holdings, I (BJ) Stock Forecasts

Summary

BJ’s Wholesale Club Holdings owns BJ’s Wholesale Club, which operates a chain of warehouse clubs on the East Coast. BJ’s positions itself between traditional grocery stores and warehouses like Sam’s Club and Costco, and offers a wider range of items and smaller pack sizes than Costco and Sam’s. The company posted total revenue of $18.9 billion in FY23, which ended on January 28, 2023. Income from membership fees represented 2.0% of total revenue and 54% of operating income. The company sells name-brand merchandise and food to members, who are small business owners and consumers. Based in Westborough, Massachusetts, the company also offers specialty services, including tire installation, optical services, and photo developing.

At the end of FY23, the company operated 226 BJ’s clubs and 157 gas stations in 17 states. More than half of the clubs are in four states: New York, Florida, Massachusetts, and New Jersey. About 23% of FY22 sales were generated in the New York City metro area (down from 25% in FY21 and FY20). Clubs range from 63,000 to 163,000 square feet. BJ’s sells a relatively narrow assortment of approximately 7,000 SKUs, which it plans to trim to about 6,000 to improve inventory turnover. Groceries represented 67% of the company’s FY23 net sales (71% in FY22); general merchandise and services accounted for 12% in FY23, and 14% in FY22 and gasoline rose to 21% in FY23 from 15% in FY22 and 9% in FY21.

A predecessor company, BJ’s Wholesale Club, traded as a public company until it was acquired on September 30, 2011 by an investor group led by Leonard Green & Partners and CVC Capital. On July 2, 2018, the company again went public as BJ’s Wholesale Club Holdings on the NYSE. CVC and Leonard Green held no shares when the company published its FY21 annual report.

The company’s fiscal year ends on the Saturday closest to January 31. The convention at Argus, Bloomberg, and other data service providers is to number the fiscal year based on the calendar year in which it ends. BJ’s current fiscal year has 53 weeks and will end on February 3, 2024. We thus call the current year FY24 while the company calls it FY23.