BJ’s Wholesale Club builds on prior-year gains in Q2

BJ’s Wholesale Club topped the high end of Wall Street’s earnings forecast for its fiscal 2021 second quarter, as the company added to COVID-19-driven growth from a year ago.

Westborough, Mass.-based BJ’s said Thursday that, for the quarter ended July 31, net sales climbed 5.6% to $4.09 billion from $3.87 billion in the fiscal 2020 second quarter, when the company posted an 18.4% gain. Membership fee income grew 7.6% to $88.8 million, giving the retailer total quarterly revenue of $4.18 billion, up 5.6%.

Comparable-club sales rose 4% year over year but were down 3.4% excluding fuel, compared with increases of 17.2% overall and 24.2% excluding gasoline in the prior-year period. BJ’s noted that comp sales were up 21.2% on a two-year stack, with growth of 20.8% excluding fuel.

“The second quarter was another impressive quarter for our company,” BJ’s President and CEO Robert Eddy said Thursday in a conference call with analysts. “Our team delivered these terrific results in the face of three external factors influencing our business: inflation, a fast-paced labor market and inventory availability challenges.”

BJ’s fuel business has seen "significant market share gains," CEO Robert Eddy said.

BJ’s membership base expanded by 3% year over year and has grown 14% on a two-year basis.

Related:Bob Eddy named CEO of BJ’s Wholesale Club

“Our growth this quarter was driven primarily by record renewals. We continue to experience the highest rates of renewal on the largest class of members we have ever attracted. Our first-year renewal rate and on-time renewals are at historic levels,” Eddy said. “We are intently focused on renewals this year because these renewing members are generally more valuable than an average new member. We’re seeing both more timely renewal and incremental renewal, and we continue to believe that we will finish year with all-time-high, first-year renewal rates.”

Grocery comparable sales remain elevated despite a second-quarter dip, according to Chief Financial Officer Laura Felice.

“Comps in our grocery division were 21% stacked, reflecting a negative 4% comp for the current quarter and a 25% comp in the prior year. On a two-year stack basis, we saw robust growth across all divisions, particularly in grocery and perishables, where stacked comps were in the 23% to 24% range,” Felice said in the analyst call. “Despite the in-stock challenges we experienced in certain food and other household categories, the team delivered a strong performance, which demonstrates our continued relevance with our members.”

Eddy said “significant market share gains” by BJ’s gas business are helping drive memberships and in-club purchases. “Gallons and comp clubs were up 25% this quarter and are increasingly ahead of the market. Since gasoline is likely the best example of a key value item, price lines are on every corner. It’s easy for us to show outstanding value,” he explained. “And when we pair the gasoline business with the club, it drives tremendous loyalty. Members who shop us for gas renew at much higher rates, and their gasoline purchases keep BJ’s top of mind for additional shopping trips in the club.”

Related:E-commerce sales lift BJ’s in Q1 amid tough year-over-year comparisons

On the e-commerce front, curbside pickup was a catalyst in digital comp sales growth of 4% for the second quarter, reflecting a two-year stacked gain of 304%, including a 300% increase in the 2020 quarter.

“Our digital platforms continue to resonate with our members and allow us to offer convenient access to the tremendous value we provide every day,” according to Eddy. “Digital sales growth relative to the prior year was driven by strong growth in our BOPIC [buy online, pickup in club] curbside offering. More than half of our BOPIC orders were delivered curbside this past quarter. Engagement among our members is most evident through the increased use of our app, which has been downloaded over 5 million times, and approximately a third of our members use it regularly. In addition, our app continues to receive industry-leading ratings. Digitally engaged members have higher average baskets and make more trips per year than members who shop in-club only.”

Pickup service, both curbside and in-club, has been a key driver of digital sales growth at BJ's.

Online sales drove about four percentage points of BJ’s 21% stacked merchandise comp sales in the second quarter, Felice reported.

“On a stacked basis, we saw robust growth across all of our digital channels, particularly in BOPIC and curbside pickup, as well as same-day delivery,” she said. “The nature of this growth is important, because it’s centered on the fulfillment method where we have advantaged economics. As you know, we operate in a warehouse environment with a limited number of SKUs and a higher average ticket, enabling us to be more efficient. BOPIC and curbside sales tend to skew towards bigger baskets, and same-day delivery sales have the same margins as traditional sales in our clubs.”

At the bottom line in the 2021 second quarter, net income totaled $111 million, or 80 cents per diluted share, compared with $106.6 million, or 76 cents per diluted share, a year ago. Adjusted net income came in at $113.3 million, or 82 cents per diluted share, versus $107.5 million, or 77 cents per diluted share, in the 2020 quarter.

Analysts, on average, had projected adjusted earnings per share of 63 cents, with estimates ranging from a low of 52 cents to a high of 71 cents, according to Refinitiv.

Going forward, private-brand growth remains a key strategic initiative, Eddy told analysts in the call.

“Our suppliers should note that we will be aggressive in this area in order to maintain great value for our members. Private label remains essential to providing great value to our members to our assortment simplification initiatives and to our category profit improvement efforts,” he said. “We made great progress this quarter; own-brand penetration increased to 23% of merchandise sales compared to 21% in the prior year. This increase was driven by strong growth in summer seasonal, recreation and other home-related categories, as well as frozen dairy and perishables. We will continue to build on this progress and further expand our own-brand portfolio over the long term, which will strengthen member loyalty, increase value and improve our margins.”

Five more BJ's locations are slated to open during the remainder of fiscal 2021.

BJ’s also will continue to steadily expand its brick-and-mortar footprint. During the second quarter, the retailer opened one new club in Seabrook, N.H. Another five new locations are expected to open in the fourth quarter, including one apiece in Port Charlotte, Fla.; Commack, N.Y.; and Lansing, Mich.; and two clubs in Pittsburgh, which represents a new market for the company.

“We continue to expect to open as many as 10 or more new clubs in 2022. In addition, we expect to open nine gas stations this year, followed by a dozen or more in 2022, which means three-quarters of our clubs will have gas stations by the end of 2022,” said Eddy. “We are very excited about our expansion, and our confidence is underpinned by the strong performance we’re seeing in new clubs, particularly in new markets where our brand is resonating. In our Michigan clubs and Pensacola, Fla., first-year [membership] renewal rates are well above chainwide averages.”

BJ finished the second quarter with 222 clubs and 151 BJ’s Gas stations in 17 states, up from 219 clubs and 148 fuel stations a year earlier.