Shares of BJ’s Wholesale Club Holdings Inc (NYSE:BJ) rose in early trading on Monday, after the company Friday reported upbeat fiscal second-quarter results.
BJ’s Wholesale Clubbenefited from higher gas prices during the quarter, both directly and indirectly in terms of sales growth, traffic and profits, according to DA Davidson’s Michael Baker.
The BJ’s Wholesale Club Holdings Analyst: Baker maintained a Buy rating and raised the price target from $105 to $108.
The BJ’s Wholesale Club Holdings Thesis: The company reinvested the benefits from higher gas prices into lower prices in the club.
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Baker highlighted that BJ’s Wholesale Club’s success in Texas underlines its long-term potential:
- These clubs are opening 30% better than planned
- Four are already open, and another one is planned for this year
- Each of the four clubs currently open in Texas is in the top 30 in the chain with respect to gas gallon sales
- Two of the clubs are in the top 10 with respect to gas gallon sales
"We think Texas will be a gateway into more growth in the southwest over time, similar to how the Michigan openings in 2019 opened the door to the Midwest," the analyst wrote.
BJ’s Wholesale performance, outside Texas, remains strong. Comps of the seven stores open since 2024 are up double digits, he added.
High Gas Prices: As prices rise, the clubs benefit not only from "outsized gallon growth" but also from more people renewing their memberships at gas stations, Baker noted.
More gallons sold drive higher profits, which is what drove most of the EBITDA and earnings beat in the fiscal second quarter, the analyst stated. "But, more important than that, BJ uses that windfall to invest back into price within the club, further driving share gains and membership loyalty," he further wrote.
BJ Price Action: Shares of BJ’s Wholesale Club Holdings had risen by 2.26% to $98.60 at the time of publication on Monday.
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