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BJ's Wholesale (BJ) Building Strong Presence Across Spectrum

BJ's Wholesale Club Holdings, Inc. BJ, one of the leading operators of membership warehouse clubs, has been reinforcing its position in the industry with its strong customer value proposition and business model. Its relentless efforts to boost the 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 omnichannel operations and ramp up delivery services.

Let’s Delve Deeper

BJ's Wholesale Club’s focus on simplifying assortments, boosting marketing and merchandising capabilities, expanding into high-demand categories as well as building its own-brands portfolio bodes well. Own brands penetration increased 200 basis points to 25% of merchandise sales in the second quarter of fiscal 2022. These endeavors have contributed to growth in membership signups and renewals, resulting in higher membership fee income and decent comparable club sales growth.

While the membership fee income jumped 11.3% year over year, the member count increased 6% in the second quarter, buoyed by healthy renewal rates and membership acquisitions. Markedly, total comparable club sales jumped 19.8% in the second quarter of fiscal 2022. Excluding the impact of gasoline sales, comparable club sales rose 7.6%, driven by traffic growth and gains in market share led by grocery and perishable categories.

BJ's Wholesale Club has been directing resources toward expanding digital capabilities to better engage with members and provide them with a convenient way to shop, including same-day delivery, curbside pick-up and buy-online, pickup-in-club. 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.

To make shopping convenient, BJ’s Wholesale Club provides a buy now, pay later payment option to its members through Citizens Pay. Additionally, BJ's Wholesale Club’s ExpressPay allows members to scan items as they shop, and pay for their purchases in the BJ’s mobile app. BJ's Wholesale Club has also 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.

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 47% in the second quarter. 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. BJ's Wholesale Club, which shares space with Costco COST, Dollar General DG and Target TGT, now envisions fiscal 2022 comparable club sales, excluding the impact of gasoline sales, to increase between 4% and 5%, up from the prior view of low-single-digit growth.

A Synopsis of Other Stocks

Costco continues to be one of the dominant warehouse retailers based on the expanse and quality of merchandise offered. The company’s key strengths are strategic investments, a customer-centric approach, merchandise initiatives and an emphasis on membership growth. These factors have been helping it register impressive sales numbers. Costco’s net sales grew 15.2% year over year to $70,764 million, while membership fees increased 7.5% to $1,327 million in the fourth quarter of fiscal 2022.

Dollar General’s initiatives such as DG Fresh, Fast Track, non-consumables, digitization and private fleet should benefit the top line. The company has been sparing no effort to bolster omnichannel operations and ramp up delivery services to provide customers with a frictionless shopping experience. Dollar General’s partnership with DoorDash continues to yield results with same-day delivery now available at more than 13,300 stores at the end of the second quarter of fiscal 2022.

Target has been deploying resources to enhance omnichannel capabilities, come up with new brands, refurbish stores and expand same-day delivery options to provide customers with a seamless shopping experience. The company has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape. These have been contributing to the top line. Target intends to spend $5 billion or more in the current fiscal year to continue scaling operations, reaching new guests while building capacity and enhancing services.


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