BJ’s Posts Q2 Exceeding Expectations, Upgrades Full-Year Outlook

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BJ’s Posts Q2 Exceeding Expectations, Upgrades Full-Year Outlook

08/28/2018
BJ’s Posts Q2 Exceeding Expectations, Upgrades Full-Year Outlook
BJ's is working to attract and retain members, as well as to boost convenience at its club, according to Chairman and CEO Christopher J. Baldwin

BJ's has reported its fourth straight quarter of positive merchandise comps and, as a result, has updated its outlook for the year.

For the second quarter of its fiscal 2018, which ended Aug. 4, BJ's Wholesale Club Holdings Inc. posted a 4.3 percent net sales increase to $3.2 billion and a 2 percent rise in comparable-club sales excluding the impact of gasoline sales. BJ's attributed the strong results to its initial efforts to boost business.

“We are pleased with our second-quarter results, which exceeded our expectations,” said BJ's Chaiarman and CEO Christopher J. Baldwin. “We’re still in the very early stages of our transformation. Our progress is accelerating as we work to attract and retain members, get them shopping, and make it more convenient to shop at BJ's.  As a result of our performance, we have increased our expectations for the full-year.”

Q2 Results

For Q2 of fiscal 2017, BJ's net sales were $3.1 billion. For Q2 2018, its comps, including the gas sales, rose 5 percent from last year.

Membership fee income grew 9.7 percent to $70.4 million, compared to $64.2 million for the year-ago period. Gross profit rose to $588.5 million from $553.3 million last year. Excluding gas sales, merchandise gross margin rate during Q2 of 2018 increased by about 80 basis points over the second quarter of fiscal 2017, which BJ's said was mainly because of progress in its category profitability improvement program.

BJ's income tax benefit for Q2 2018 was $15.4 million, versus $11.1 million in the year-ago period, due to the windfall tax benefit logged during the 2018 quarter.

The company’s loss from continuing operations was $5.5 million in Q2 2018, compared with $19.8 million last year, while adjusted EBITDA grew 5.4 percent to $143 million from the $135.7 million reported for the year-ago period.

Half-Year Results

For the 26 weeks ended Aug. 4, BJ's net sales rose to $6.2 billion from $6 billion in the first half of fiscal 2017. The retailer’s comps increased 4.2 percent from last year; excluding gas sales, though, merchandise comps for the first half of fiscal 2018 rose 2 percent.

MFI was up 8.4 percent to $138.4 million, compared with $127.7 million last year. Gross profit grew to $1.14 billion from $1.06 billion in the year-ago period. Excluding gas sales, merchandise gross margin rose by 90 basis points, which BJ’s attributed to ongoing progress in its category profitability improvement program.

BJ's income tax benefit was $10.3 million, versus $21.9 million in the first half of fiscal 2017, with the benefit in the first half of fiscal 2018 due to the windfall tax benefit logged during the second quarter, according to the company.

The retailer’s income from continuing operations was $8.8 million, compared with a loss from continuing operations of $39 million last year, while adjusted EBITDA rose 12.9 percent to $264.6 million, from $234.4 million in the year-ago period.

BJ's noted that in July it consummated its IPO at an offering price to the public of $17 per share, selling 43.1 million shares of its common stock, including the additional 5.6 million shares purchased by the underwriters in the exercise of their overallotment option, leading to total net proceeds of $691 million after deducting underwriters' discounts and commissions. Following the IPO, BJ’s received ratings upgrades from both Moody's and Standard and Poor's.

Buoyed by its Q2 and half-year 2018 results, BJ’s now projects net sales to be in the range of $12.6 billion to $12.7 billion and merchandise comps, which exclude gasoline, of 1.8 percent to 2.1 percent, and capital expenditures to be in the range of $160 million to $170 million, among other increased guidance.

Westborough, Mass.-based BJ’s operates 215 membership warehouse clubs and 135 BJ's Gas locations in 16 states. 

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