BJ's Turns Heads With Impressive Q2 Numbers

Strong grocery category drives traffic
Marian Zboraj, Progressive Grocer
BJ's Exterior
Expansion plans remain on track for BJ's, with 11 new club openings expected in fiscal year 2022.

Consumers looking to buy in bulk to save on high-priced groceries have helped BJ’s Wholesale Club realize impressive gains in traffic and market share during its second quarter ended July 30.

“Our business model is designed to work well in the current consumer environment, where value is king, and we believe we are well positioned for growth by doing what we do best – delivering great value to our members,” said BJ’s President and CEO Bob Eddy.

Strong results in the quarter include membership fee income increasing by 11.3% year over year to $98.8 million. Total comparable-club sales increased by 19.8% in the second quarter compared with the second quarter of fiscal 2021. Excluding the impact of gasoline sales, comp sales increased by 7.6%. For the first half of fiscal 2022, total comps increased by 17.2% compared with the first half of fiscal 2021. Excluding the impact of gasoline sales, comps increased by 5.9% in the first half of fiscal 2022.

The company grew market share in the second quarter led by grocery and perishables as members increasingly shopped for household essentials at lower unit prices. Comps in grocery, perishables and sundries division grew by 8% in the second quarter and a 5% on a two-year stack and 29% on a three-year stack.

Online was another shining area for second quarter. The company reported that digitally enabled sales growth was 47.0% year over year. 

Gross profit increased to $860.0 million in the second quarter, from $763.5 million last year during same period. The company's merchandise gross margin rate, which excludes gasoline sales and membership fee income, decreased 50 basis points over the second quarter of fiscal 2021. Merchandise margins were affected by increased freight costs as well as investments in inflationary categories and markdowns in general merchandise inventory.

Markdowns included BJ’s WOW Days in July, its biggest event of the summer. Available in-club and online, the three-day event allowed members to find savings of up to 40% off hundreds of items across the home, consumer electronics, and health and beauty categories.  

Eddy noted that the company continues to deliver tremendous value across virtually every aspect of its business. “Our relentless focus on investing in our long-term initiatives has put us in a place to capitalize on current trends and deliver this strong performance,” he said. “Our member base is growing in both quality and size. We are improving our merchandising to offer more value. We are growing our digital business, offering more convenience and optionality for our members. We are expanding our footprint into new and existing markets with success.”

Expansion plans remain on track for the company, with 11 new club openings expected in fiscal year 2022. In June, BJs revealed the next phase of its 2022 development plans, which included the opening of four new clubs in Noblesville, Ind.; New Albany, Ohio; Wayne, N.J.; and Midlothian, Va. The Noblesville club will be the first club for the retailer in the state of Indiana.

Meanwhile, selling, general and administrative expenses (SG&A) increased to $651.2 million in the second quarter of fiscal 2022, compared with last years $598.1 million. The increase was primarily driven by increased labor costs as a result of last year’s wage investments, as well as the acquisition, integration and operating expenses related to the acquisition of assets from Burris Logistics. On May 2, BJs completed its acquisition of four distribution centers and a related private transportation fleet from Milford, Del.-based Burris, bringing its end-to-end perishable supply chain in-house.

The operating income for BJs increased to $202.9 million, or 4.0% of total revenues, in the second quarter, compared with $163.8 million, or 3.9% of total revenues, last year. Additionally, its adjusted EBITDA increased 24.3% to $273.7 million in the second quarter. 

Under its existing share repurchase program, the company repurchased 353,000 shares of common stock, totaling $22.8 million in the second quarter of fiscal 2022.

On July 28, BJs entered into a new five-year revolving credit facility that increased the total committed amount from $1.0 billion to $1.2 billion. The new ABL revolving facility provides additional financial flexibility to execute on the company’s strategic initiatives.

BJ’s remains confident going forward, with EVP and CFO Laura Felice citing sustained strength in its grocery business and gains in market share. “We expect fiscal year 2022 comparable-club sales growth, excluding the impact of gasoline sales, to be in the 4%-5% range, up from our original guidance of low single digit,” she said. “While we expect continued merchandise margin rate pressure, we also expect fiscal year 2022 EPS to be in the $3.50-$3.60 range, up from our original guidance of approximately $3.25. We remain confident that the strength of our core business and our intense focus on delivering value will continue to drive long-term growth.”

Westborough, Mass.-based BJ's operates 229 membership warehouse clubs and 160 BJ’s Gas locations in 17 states. The company’s common stock is traded on the New York Stock Exchange. BJ’s is No. 26 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America

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