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MARKETS LIVE BLOG:

STOCKS RISE, LED BY STELLAR ALPHABET, MICROSOFT EARNINGS

Results from 'Magnificent Seven' duo show cloud revenue boosted by strong AI demand

BJ's Wholesale's (BJ) Omnichannel & Digitization Key to Growth

Zacks Equity Research
·4 min read

BJ's Wholesale Club Holdings, Inc. BJ continues to navigate through the challenging retail environment, courtesy of its strong customer value proposition and business model. Its relentless efforts to boost membership base, simplify assortments, enhance digital capabilities and accelerate club openings have been contributing to sales. The company has been sparing no effort to bolster omni-channel operations and ramp up delivery services.

Digitization a Key Catalyst

BJ's Wholesale Club has been directing resources toward expanding digital capabilities in order to better engage with members and provide them a convenient way to shop, including same-day delivery, curbside pick-up, and buy-online, pickup-in-club (BOPIC). It has built a strong digital portfolio with Bjs.com, BerkleyJensen.com, Wellsleyfarms.com, delivery.bjs.com as well as BJ’s mobile app. These enable members to buy, review products and digitally add coupons to their membership card.

With consumers becoming increasingly dependent on digital solutions, the company has been rolling out new digital services. BJ’s Wholesale Club, through Citizens Pay, provides a buy now, pay later payment option to its members for purchases of over $99 made through its website for delivery and with buy online, pick up in-club and curbside pick-up. Additionally, BJ's Wholesale Club’s ExpressPay enables members to scan items as they shop and pay for their purchases in the BJ’s mobile app.

Zacks Investment Research
Zacks Investment Research


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BJ's Wholesale Club has teamed up with DoorDash to provide on-demand grocery delivery from its stores. The company has also rolled out Same-Day Select, through which members, on payment of an upfront fee, can avail of either unlimited or a set number of same-day grocery deliveries, delivered in as little as two hours. Its acquisition of the perishable supply chain from Burris Logistics positions it well to scale up supply chain capabilities and expand fresh food offerings.

Management believes that digitally engaged members have higher average baskets and make more trips per year than members who shop in-club only. Digitally-enabled sales rose 26% in the first quarter of fiscal 2022 and more than 400% on a three-year stacked basis. Clubs fulfill approximately 80% of digitally enabled sales.

Bottom Line

We believe that BJ's Wholesale Club’s growth strategies, better price management, decent membership trends, and digitization should keep supporting comparable sales trends. The company’s comparable sales increased for the fifth straight time in first-quarter fiscal 2022. Total comparable club sales jumped 14.4% during the quarter. Excluding the impact of gasoline sales, comparable club sales rose 4.1% in the first quarter, driven by traffic growth.

Impressively, shares of this Zacks Rank #3 (Hold) company have climbed 25.9% in the past year against the industry’s decline of 37.9%.

3 Stocks to Consider

We have highlighted three better-ranked stocks, namely Dollar Tree DLTR, Tractor Supply Company TSCO and United Natural Foods UNFI.

Dollar Tree, which operates discount variety retail stores, carries a Zacks Rank #2 (Buy) at present. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and EPS suggests growth of 6.7% and 40.5%, respectively, from the year-ago reported numbers. DLTR has an expected EPS growth rate of 15.5% for three-five years.

Tractor Supply Company, the largest rural lifestyle retailer in the United States, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 12.4%, on average.

The Zacks Consensus Estimate for Tractor Supply Company’s current financial year sales and EPS suggests growth of 8.2% and 10.6%, respectively, from the year-ago period. TSCO has an expected EPS growth rate of 10.1% for three-five years.

United Natural Foods, one of the premier grocery wholesalers delivering the widest variety of fresh, branded, and owned brand products, carries a Zacks Rank #2 at present. UNFI has a trailing four-quarter earnings surprise of 29.9%, on average.

The Zacks Consensus Estimate for United Natural Foods’s current financial-year sales and EPS suggests growth of 7.2% and 4.9%, respectively, from the year-ago reported numbers.


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Zacks Investment Research