BJ's Wholesale Club's fiscal fourth-quarter earnings are anticipated to align closely with Wall Street's projections, as membership momentum is expected to persist despite the recent fee increase, UBS Securities reported. The warehouse club operator is set to release its results on Thursday, with UBS raising its earnings forecast to $0.87 per share from a previous $0.83.
This updated outlook reflects a consensus that aligns with the broader market expectations. BJ's strategic investments in perishables, along with the capture of sales from closed Stop & Shop locations, have likely bolstered its grocery sales. The enhancement of its general merchandise assortment in anticipation of the holiday season probably also supported overall performance; however, any potential upside in this domain may have been restricted due to a challenging consumer backdrop, according to UBS analysts, including Mark Carden.
The brokerage is projecting a 3% increase in same-store sales during the quarter, excluding fuel, although this falls slightly short of the consensus estimate of a 3.1% gain. Membership fee income is projected to have grown 8% year over year, surpassing Wall Street's estimate of a 7.6% increase. This growth metric is expected to be predominantly driven by ongoing customer acquisition initiatives and a faster expansion in higher-tier memberships.
Analysts noted that they do not foresee significant impact from the company's recent fee hike during this quarter, primarily due to timing considerations. In November, BJ's announced an increase in the base membership fee, which will rise by $5 to $60 annually, while the Club+ tier will increase by $10 to $120, effective January 1.
On Tuesday, BJ's shares rose by 3.2% in late-afternoon trading. While BJ's likely gained market share in gasoline gallon sales during the quarter, analysts expect fuel profitability to have come in slightly below expectations. Looking ahead, the company is expected to guide for top-line growth consistent with its long-term algorithm, projecting low- to mid-single-digit increases in same-store sales and mid-single-digit revenue growth.
Additionally, it is likely to indicate results closer to the lower end of its earnings per share (EPS) growth algorithm, which is estimated at high-single-digit to low-double-digit growth, according to UBS. The brokerage maintains a buy rating and sets a price target of $108 on the stock. "We believe BJ's value proposition, improving membership metrics, and successful store openings position the warehouse club favorably for sustainable and more predictable growth moving forward," analysts concluded..