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BJ’s Wholesale Club Holdings, Inc. 10-K Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

BJ’s Wholesale Club Holdings, I

Filing date:

03/14/2025

TLDR:

ELI5:

BJ’s, like Costco or Sam’s Club, made more money this year from sales and memberships, but it cost them more to operate, so their profits didn’t grow as much. Experts suggest waiting to see if they can improve their profit margins before investing more.

Accession #:

0001531152-25-000013

Published on

Analyst Summary

  • Net sales increased by 2.5% to $20,045.3 million, and membership fee income increased by 8.5% to $456.5 million.
  • Operating income decreased by 3.5% to $772.2 million, while net income increased by 2.0% to $534.4 million.
  • Comparable club sales increased by 2.5%, driven by strength in perishables and general merchandise.
  • Gross margins experienced slight pressure due to the mix of sales and investments.
  • SG&A expenses increased due to new club openings and higher compensation.
  • Net cash from operating activities increased to $900.9 million, and adjusted free cash flow increased to $312.9 million.
  • Management highlights strength in perishables, grocery, and sundries divisions, with a focus on infrastructure investments to support growth.
  • The company’s significant reliance on the New York metropolitan area (23% of net sales) creates a geographic concentration risk.
  • Gross Profit Margin increased slightly by 0.66% to 18.36%, but remains below the industry average.
  • Operating Profit Margin decreased by 5.99% to 3.77%, trending towards the lower end of the industry average.
  • Net Profit Margin decreased slightly by 0.38% to 2.61%, remaining within the industry average.
  • Return on Assets (ROA) decreased by 3.57% to 7.56%, but remains within the industry average.
  • Return on Equity (ROE) decreased by 19.41% to 28.93%, but remains above the industry average.
  • Basic EPS increased by 2.54% to $4.04, and Diluted EPS increased by 3.09% to $4.00.
  • The Current Ratio increased slightly by 1.37% to 0.74, but remains below the healthy threshold of 1.0, indicating potential liquidity concerns.
  • The Quick Ratio increased by 7.14% to 0.15, but remains significantly below the healthy threshold of 0.5, indicating potential short-term liquidity issues.
  • The Cash Ratio remained constant at 0.01, significantly below the healthy threshold of 0.2, indicating reliance on other current assets or financing for immediate obligations.
  • The Debt-to-Equity Ratio decreased by 36.73% to 0.31, indicating lower leverage compared to the previous year and the industry average.
  • The Debt-to-Assets Ratio decreased by 27.27% to 0.08, indicating lower leverage compared to the previous year and the industry average.
  • The Interest Coverage Ratio increased by 21.29% to 15.04, indicating a strong ability to cover interest expenses.
  • Inventory Turnover decreased slightly by 0.70% to 11.34, remaining within the industry average.
  • Days Sales Outstanding (DSO) increased by 15.30% to 5.05 days.
  • Days Payable Outstanding (DPO) increased by 3.25% to 27.32 days.
  • Asset Turnover decreased by 3.07% to 2.84, remaining within the industry average.
  • The Price-to-Earnings Ratio (P/E) is 27.27, above the industry average, suggesting it may be overvalued or that investors expect high growth.
  • The Price-to-Book Ratio (P/B) is 7.76, above the industry average, suggesting it may be overvalued.
  • The Price-to-Sales Ratio (P/S) is 0.70, within the industry average.
  • The Enterprise Value to EBITDA (EV/EBITDA) is 13.64, within the industry average.
  • Revenue Growth is 2.67%.
  • Net Income Growth is 2.04%.
  • EPS Growth is 3.09%.
  • Adjusted EBITDA increased by 0.78% to $1,090,595 (in thousands).
  • Adjusted Free Cash Flow increased by 18.47% to $312,889 (in thousands).
  • Comparable Club Sales increased by -350.00% to 2.5%.
  • Membership Renewal Rate remained constant at 90%.

Opportunities and Risks

  • Macroeconomic Factors: Consumer spending is susceptible to economic downturns, inflation, and unemployment.
  • Competition: Intense competition from other warehouse clubs, supermarkets, and online retailers.
  • Supply Chain Disruptions: Dependence on vendors and potential disruptions in merchandise distribution.
  • Cybersecurity: Risk of data breaches and payment-related risks.
  • Membership Growth: Continued expansion of the membership base and increased penetration of higher-tier memberships.
  • Digital Expansion: Leveraging digital platforms (website, mobile app) to enhance member experience and drive sales.
  • New Club Openings: Strategic expansion into new and existing markets.
  • Private Label Growth: Increasing sales penetration of Wellsley Farms and Berkley Jensen brands.

BJ’s Wholesale Club Holdings, Inc. – Form 10-K Analysis (FY 2024)

Executive Summary

BJ’s Wholesale Club Holdings, Inc. reported a solid fiscal year 2024, marked by revenue growth and continued membership expansion. Comparable club sales increased, driven by strength in perishables and general merchandise. Membership fee income also saw a healthy rise. However, cost of sales remained a concern, impacting gross margins. SG&A expenses increased due to new club openings and higher compensation. Overall, the company demonstrates resilience in a competitive retail landscape. A “Hold” rating is recommended, pending further assessment of margin pressures and the impact of recent membership fee increases.

Recommendation: Hold

Company Overview

BJ’s Wholesale Club is a leading membership warehouse club operator primarily located in the eastern United States. The company offers a curated assortment of groceries, fresh foods, general merchandise, and gasoline. BJ’s differentiates itself through its membership model, providing savings compared to traditional supermarkets. The company operates both physical clubs and a growing digital platform, including a website and mobile app.

Financial Statement Analysis

Key Financial Data (FY 2024 vs FY 2023)

Metric FY 2024 (USD Millions) FY 2023 (USD Millions) Change
Net Sales 20,045.3 19,548.0 +2.5%
Membership Fee Income 456.5 420.7 +8.5%
Operating Income 772.2 800.4 -3.5%
Net Income 534.4 523.7 +2.0%
Comparable Club Sales +2.5% -1.0% +3.5%

Key Ratios

Ratio FY 2024 FY 2023 Analysis
Gross Margin (%) Relatively flat, slight decrease in merchandise gross margin Relatively flat, slight decrease in merchandise gross margin Slight margin pressure due to mix of sales and investments.
SG&A as % of Net Sales Increased Increased Increased due to new club openings and higher compensation.

Cash Flow Analysis

Metric FY 2024 (USD Millions) FY 2023 (USD Millions)
Net Cash from Operating Activities 900.9 718.9
Adjusted Free Cash Flow 312.9 264.1

Strong operating cash flow driven by working capital improvements. Increased capital spending impacted free cash flow.

Management’s Discussion and Analysis (MD&A) Insights

  • Management highlights strength in perishables, grocery, and sundries divisions.
  • Focus on infrastructure investments to support growth.
  • Mentions the impact of gasoline prices on net sales.
  • Discusses the impact of inflation and deflation trends.

Potential Red Flags & Uncommon Metrics

  • Increased SG&A: The increase in selling, general, and administrative expenses warrants close monitoring. While some of this increase is attributable to growth initiatives (new club openings), it’s important to assess whether these expenses are translating into commensurate revenue and profit gains.
  • Reliance on New York Metropolitan Area: The company’s significant reliance on the New York metropolitan area (23% of net sales) creates a geographic concentration risk. Economic downturns or other adverse events in this region could disproportionately impact BJ’s overall performance.

Risk and Opportunity Assessment

Risks

  • Macroeconomic Factors: Consumer spending is susceptible to economic downturns, inflation, and unemployment.
  • Competition: Intense competition from other warehouse clubs, supermarkets, and online retailers.
  • Supply Chain Disruptions: Dependence on vendors and potential disruptions in merchandise distribution.
  • Cybersecurity: Risk of data breaches and payment-related risks.

Opportunities

  • Membership Growth: Continued expansion of the membership base and increased penetration of higher-tier memberships.
  • Digital Expansion: Leveraging digital platforms (website, mobile app) to enhance member experience and drive sales.
  • New Club Openings: Strategic expansion into new and existing markets.
  • Private Label Growth: Increasing sales penetration of Wellsley Farms and Berkley Jensen brands.

Conclusion and Actionable Insights

BJ’s Wholesale Club demonstrates a solid business model with growth potential. However, investors should closely monitor margin pressures, SG&A expenses, and geographic concentration risks. The recent membership fee increases could provide a boost to revenue, but it’s crucial to assess member retention rates. A “Hold” rating is recommended, pending further evidence of improved profitability and successful execution of growth strategies.

Disclaimer: This analysis is based solely on the provided SEC filing data and does not constitute financial advice. Investors should conduct their own due diligence before making any investment decisions.

Commentary

BJ’s Wholesale Club demonstrates a mixed financial performance. Revenue increased, driven by net sales and membership fee income, but operating income declined. Net income saw a slight increase, but profitability margins generally decreased. The company also shows strong cash flow from operations and adjusted free cash flow.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Metric: (Total Revenues – Cost of Sales) / Total Revenues = ($20,501,804 – $16,737,378) / $20,501,804 = 18.36%
    • Trend: Previous year Gross Profit Margin = ($19,968,689 – $16,326,129) / $19,968,689 = 18.24%. Percentage Change: ((18.36 – 18.24) / 18.24) * 100 = 0.66%
    • Industry: The industry average gross profit margin for discount retailers is around 22-28%. BJ’s is slightly below this range.
  • Operating Profit Margin

    • Metric: Operating Income / Total Revenues = $772,206 / $20,501,804 = 3.77%
    • Trend: Previous year Operating Profit Margin = $800,419 / $19,968,689 = 4.01%. Percentage Change: ((3.77 – 4.01) / 4.01) * 100 = -5.99%
    • Industry: The industry average operating profit margin for discount retailers is around 3-5%. BJ’s is within this range, but trending towards the lower end.
  • Net Profit Margin

    • Metric: Net Income / Total Revenues = $534,417 / $20,501,804 = 2.61%
    • Trend: Previous year Net Profit Margin = $523,741 / $19,968,689 = 2.62%. Percentage Change: ((2.61 – 2.62) / 2.62) * 100 = -0.38%
    • Industry: The industry average net profit margin for discount retailers is around 2-4%. BJ’s is within this range.
  • Return on Assets (ROA)

    • Metric: Net Income / Total Assets = $534,417 / $7,065,305 = 7.56%
    • Trend: Previous year ROA = $523,741 / $6,677,622 = 7.84%. Percentage Change: ((7.56 – 7.84) / 7.84) * 100 = -3.57%
    • Industry: The industry average ROA for discount retailers is around 5-10%. BJ’s is within this range.
  • Return on Equity (ROE)

    • Metric: Net Income / Total Stockholders’ Equity = $534,417 / $1,847,454 = 28.93%
    • Trend: Previous year ROE = $523,741 / $1,458,851 = 35.90%. Percentage Change: ((28.93 – 35.90) / 35.90) * 100 = -19.41%
    • Industry: The industry average ROE for discount retailers is around 15-25%. BJ’s is above this range.
  • Earnings Per Share (EPS) – Basic and Diluted

    • Metric: Basic EPS = $4.04, Diluted EPS = $4.00
    • Trend: Previous year Basic EPS = $3.94, Diluted EPS = $3.88. Basic EPS Percentage Change: ((4.04 – 3.94) / 3.94) * 100 = 2.54%. Diluted EPS Percentage Change: ((4.00 – 3.88) / 3.88) * 100 = 3.09%
    • Industry: EPS varies widely. It’s best to compare to direct competitors.

Liquidity

  • Current Ratio

    • Metric: Total Current Assets / Total Current Liabilities = $1,878,960 / $2,534,082 = 0.74
    • Trend: Previous year Current Ratio = $1,794,006 / $2,468,048 = 0.73. Percentage Change: ((0.74 – 0.73) / 0.73) * 100 = 1.37%
    • Industry: A current ratio of 1.0 or greater is generally considered healthy. BJ’s is below this, indicating potential liquidity concerns.
  • Quick Ratio (Acid-Test Ratio)

    • Metric: (Total Current Assets – Merchandise Inventories) / Total Current Liabilities = ($1,878,960 – $1,508,988) / $2,534,082 = 0.15
    • Trend: Previous year Quick Ratio = ($1,794,006 – $1,454,822) / $2,468,048 = 0.14. Percentage Change: ((0.15 – 0.14) / 0.14) * 100 = 7.14%
    • Industry: A quick ratio of 0.5 or greater is generally considered healthy. BJ’s is significantly below this, indicating potential short-term liquidity issues.
  • Cash Ratio

    • Metric: (Cash and Cash Equivalents) / Total Current Liabilities = $28,272 / $2,534,082 = 0.01
    • Trend: Previous year Cash Ratio = $36,049 / $2,468,048 = 0.01. Percentage Change: ((0.01 – 0.01) / 0.01) * 100 = 0.00%
    • Industry: A cash ratio of 0.2 or greater is generally considered healthy. BJ’s is significantly below this, indicating reliance on other current assets or financing for immediate obligations.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Metric: Total Debt / Total Stockholders’ Equity = $575,000 / $1,847,454 = 0.31
    • Trend: Previous year Debt-to-Equity Ratio = $719,000 / $1,458,851 = 0.49. Percentage Change: ((0.31 – 0.49) / 0.49) * 100 = -36.73%
    • Industry: The industry average debt-to-equity ratio for discount retailers is around 0.5-1.0. BJ’s is below this range, indicating lower leverage.
  • Debt-to-Assets Ratio

    • Metric: Total Debt / Total Assets = $575,000 / $7,065,305 = 0.08
    • Trend: Previous year Debt-to-Assets Ratio = $719,000 / $6,677,622 = 0.11. Percentage Change: ((0.08 – 0.11) / 0.11) * 100 = -27.27%
    • Industry: The industry average debt-to-assets ratio for discount retailers is around 0.2-0.4. BJ’s is below this range, indicating lower leverage.
  • Interest Coverage Ratio (Times Interest Earned)

    • Metric: Operating Income / Interest Expense, Net = $772,206 / $51,359 = 15.04
    • Trend: Previous year Interest Coverage Ratio = $800,419 / $64,527 = 12.40. Percentage Change: ((15.04 – 12.40) / 12.40) * 100 = 21.29%
    • Industry: An interest coverage ratio of 3.0 or greater is generally considered healthy. BJ’s is well above this, indicating a strong ability to cover interest expenses.

Activity/Efficiency

  • Inventory Turnover

    • Metric: Cost of Sales / Average Inventory = $16,737,378 / (($1,508,988 + $1,454,822) / 2) = 11.34
    • Trend: Previous year Inventory Turnover = $16,326,129 / (($1,454,822 + $1,383,351) / 2) = 11.42. Percentage Change: ((11.34 – 11.42) / 11.42) * 100 = -0.70%
    • Industry: The industry average inventory turnover for discount retailers is around 8-12. BJ’s is within this range.
  • Days Sales Outstanding (DSO)

    • Metric: (Accounts Receivable / Net Sales) * 365 = ($277,326 / $20,045,329) * 365 = 5.05 days
    • Trend: Previous year DSO = ($234,769 / $19,548,011) * 365 = 4.38 days. Percentage Change: ((5.05 – 4.38) / 4.38) * 100 = 15.30%
    • Industry: DSO varies widely depending on the retailer’s credit policies. A low DSO is generally favorable.
  • Days Payable Outstanding (DPO)

    • Metric: (Accounts Payable / Cost of Sales) * 365 = ($1,253,512 / $16,737,378) * 365 = 27.32 days
    • Trend: Previous year DPO = ($1,183,281 / $16,326,129) * 365 = 26.46 days. Percentage Change: ((27.32 – 26.46) / 26.46) * 100 = 3.25%
    • Industry: DPO varies widely depending on the retailer’s payment terms with suppliers.
  • Asset Turnover

    • Metric: Net Sales / Total Assets = $20,045,329 / $7,065,305 = 2.84
    • Trend: Previous year Asset Turnover = $19,548,011 / $6,677,622 = 2.93. Percentage Change: ((2.84 – 2.93) / 2.93) * 100 = -3.07%
    • Industry: The industry average asset turnover for discount retailers is around 2-3. BJ’s is within this range.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Metric: Stock Price / EPS = $109.07 / $4.00 = 27.27
    • Trend: To determine the trend, we would need the P/E ratio from the previous comparable period, which is not provided in the filing.
    • Industry: The industry average P/E ratio for discount retailers is around 15-25. BJ’s is above this range, suggesting it may be overvalued or that investors expect high growth.
  • Price-to-Book Ratio (P/B)

    • Metric: Market Cap / Book Value of Equity = (131,638 * 1000 * $109.07) / $1,847,454,000 = 7.76
    • Trend: To determine the trend, we would need the P/B ratio from the previous comparable period, which is not provided in the filing.
    • Industry: The industry average P/B ratio for discount retailers is around 2-4. BJ’s is above this range, suggesting it may be overvalued.
  • Price-to-Sales Ratio (P/S)

    • Metric: Market Cap / Total Revenues = (131,638 * 1000 * $109.07) / $20,501,804,000 = 0.70
    • Trend: To determine the trend, we would need the P/S ratio from the previous comparable period, which is not provided in the filing.
    • Industry: The industry average P/S ratio for discount retailers is around 0.5-1.0. BJ’s is within this range.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Metric: (Market Cap + Total Debt – Cash) / EBITDA = ((131,638 * 1000 * $109.07) + $575,000,000 – $28,272,000) / $1,090,595,000 = 13.64
    • Trend: To determine the trend, we would need the EV/EBITDA ratio from the previous comparable period, which is not provided in the filing.
    • Industry: The industry average EV/EBITDA ratio for discount retailers is around 10-15. BJ’s is within this range.

Growth Rates

  • Revenue Growth

    • Metric: (Current Revenue – Previous Revenue) / Previous Revenue = ($20,501,804 – $19,968,689) / $19,968,689 = 2.67%
    • Trend: N/A
    • Industry: N/A
  • Net Income Growth

    • Metric: (Current Net Income – Previous Net Income) / Previous Net Income = ($534,417 – $523,741) / $523,741 = 2.04%
    • Trend: N/A
    • Industry: N/A
  • EPS Growth

    • Metric: (Current EPS – Previous EPS) / Previous EPS = ($4.00 – $3.88) / $3.88 = 3.09%
    • Trend: N/A
    • Industry: N/A

Other Relevant Metrics

  • Adjusted EBITDA

    • Metric: $1,090,595 (in thousands)
    • Trend: Previous year Adjusted EBITDA = $1,082,129 (in thousands). Percentage Change: (($1,090,595 – $1,082,129) / $1,082,129) * 100 = 0.78%
    • Significance: Adjusted EBITDA is a non-GAAP metric that provides a view of the company’s operating performance by excluding certain non-cash expenses and other adjustments. The company calculates it by adding back interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, restructuring costs, and other adjustments to income from continuing operations.
  • Adjusted Free Cash Flow

    • Metric: $312,889 (in thousands)
    • Trend: Previous year Adjusted Free Cash Flow = $264,118 (in thousands). Percentage Change: (($312,889 – $264,118) / $264,118) * 100 = 18.47%
    • Significance: Adjusted Free Cash Flow is a non-GAAP metric that represents the cash flow available to the company after accounting for capital expenditures and proceeds from sale-leaseback transactions. It is calculated as net cash provided by operating activities less additions to property and equipment, net of disposals, plus proceeds from sale-leaseback transactions.
  • Comparable Club Sales

    • Metric: 2.5%
    • Trend: Previous year Comparable Club Sales = (1.0)%. Percentage Change: ((2.5 – (-1.0)) / (-1.0)) * 100 = -350.00%
    • Significance: Comparable club sales is a key indicator of the company’s revenue growth from existing locations.
  • Membership Renewal Rate

    • Metric: 90%
    • Trend: Previous year Membership Renewal Rate = 90%. Percentage Change: ((90 – 90) / 90) * 100 = 0.00%
    • Significance: Membership renewal rate is a critical metric for BJ’s, as membership fees contribute significantly to their revenue. A high renewal rate indicates customer loyalty and the value of the membership program.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️