BJ's Wholesale Club Holding Inc. (NYSE: BJ) is a membership-only warehouse club operating on the East Coast of the United States. The company operates 244 clubs and 176 BJ's Gas locations in 20 states from Maine to Florida. Its stores sell groceries, electronics, general merchandise, patio and garden supplies, auto supplies, and gasoline. It also has private-label brands, including Wellsley Farms and Berkeley Jenson. Its shares recently hit all-time highs at $90.43.

BJ's operates in the retail/wholesale sector and competes with warehouse clubs and retailers like Costco Wholesale Co. (NASDAQ: COST), Walmart Inc. (NYSE: WMT), and Target Co. (NYSE: TGT).

BJ's Wholesale Clubs Versus Costco Warehouses

The natural comparison between BJ's and the king of the hill, Costco, is hard to avoid. The average BJ's store is around 113,000 square feet compared to an average Costco around 146,000 square feet. The sizes range by geography. BJ's also has smaller clubs called BJ's Market, around 43,000 square feet. BJ's operates 244 clubs in the U.S., whereas Costco operates over 800 locations worldwide.

Does BJ's Smaller Size Imply More Upside Than Costco?

BJ's carries over 7,000 stock-keeping units (SKUs) compared to Costco, which has around 4,000. Most grocery stores carry up to 30,000 SKUs. Costco customers tend to buy in bulk, and Costco delivers there. BJ's stores are smaller, with a focus on value and perishables. They tend to be less crowded and overwhelmingly massive than Costco warehouses. Costco has a $376.8 billion market cap compared to BJ's tiny $11.66 billion market cap. However, this may imply more upside or room for growth for BJ's stock, which is trading at 22.47x forward earnings compared to 53.19x for Costco.

BJ Stock May Be Breaking Down on a Rising Wedge Pattern

The daily candlestick chart for BJ illustrates a rising wedge pattern comprised of an upper trendline of higher highs and a lower trendline of higher lows that converge. The breakdown occurs when the stock falls under the lower trendline at $88.00, which is testing. The daily relative strength index (RSI) has been falling in a choppy manner to the 56-band after failing to break out through the 70-band. Pullback support levels are at $83.71, $80.42, $74.44, and $71.81.

BJ's Reports a Modest Q1 2024 Earnings Report

BJ's reported Q1 2024 EPS of 85 cents versus 83 cents consensus estimates for a 2-cent beat. Net income fell to $111 million compared to $116.1 million in the year-ago period. Adjusted EBITDA fell to $236.4 million compared to $251.5 million in the year-ago period.

Revenues climbed 4.1% YoY to $4.92 billion, beating analyst estimates of $4.86 billion. Comparable club sales grew 1.6% YoY. Comparable club sales, excluding gasoline sales, rose 0.6% YoY, led by robust traffic and unit growth. Digitally enabled comparable sales rose 21% YoY. Membership fee income was excellent at 8.6% YoY and $111.4 million. Merchandise gross margin rate decreased by 50 bps YoY. BJ's opened one new club and gas station in the quarter.

BJ's Wholesale reaffirmed its EPS guidance of $3.75 to $4.00 for full-year 2024, compared to $3.93 consensus analyst estimates.

BJ's CEO is Upbeat About Membership and Market Share Growth

BJ's Wholesale Club CEO Bob Eddy was upbeat during the conference call. He underscored the robust growth in memberships and market share despite inflation. The company plans to open 12 new BJ's locations in 2024. Substantial traffic in BJ's stores and gas stations contributed 3% to the quarter. Inflation was flat, but it managed to grow unit volumes in its perishables, sundries, and grocery division, increasing comp units. The company gained market share in units and dollars. Comp growth was up over 1% in the quarter for the aforementioned divisions.

Eddy commented, “Consumers remain discerning in their purchasing, and we have also found that members are increasingly waiting to shop higher ticket seasonal categories such as patio sets and air conditioners exactly when the weather turns, not in anticipation of it. When presented with great quality of value members are spending, general merchandise is critical to our model, and we continue to make outstanding progress on our transformation efforts.”

BJ's Wholesale analyst ratings and price targets are at MarketBeat.