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BJ's Wholesale Club: Making Growth Investments

Lukas Wolgram profile picture
Lukas Wolgram


  • BJ's Wholesale Club has laid out a plan for the company to achieve greater growth going forward.
  • A new CEO could lead the company to the promised land.
  • Competition with Sam's Club and Costco remains steep.
  • BJ's Wholesale Club's valuation is well below that of its peers.
  • I'm rating the stock neutral for now until management's plan translates to greater top line growth.

BJ's Wholesale Club (NYSE:BJ) reported fiscal 2019 and Q4 earnings Thursday before the open. While the company missed expectations, the stock reacted positively as management laid out its plan to make key investments that should drive greater growth going forward. The stock finished the day up nearly 4% on a day when the S&P 500 closed down more than 3% as investors seemed to like management's plans on the conference call. While I think the plans are solid and should lead to improvement, I'm rating the stock neutral until I see real results in the numbers from these investment initiatives.

Strategic Growth Initiatives

New CEO Lee Delaney introduced Project Momentum on the call. This is a plan that management has come up with to save $100 million in various costs across the business. This money will then be reinvested in growth opportunities for the company, rather than flow through to the bottom line. The project will address some of the major inefficiencies that management currently believes exist including realignment in the organization and a reduction of duplicative work among employees.

Those savings, along with more investment, will flow to several initiatives to drive growth. The first is the company's omnichannel business. This includes things such as online sales, online orders to be picked up in the club, and same-day delivery services. I'm inclined to agree with management that these are key areas the company should focus on not only to help growth but also to keep up with the competition.

Second, the company plans to invest in the membership side of the business. BJ's currently offers annual memberships for $55, undercutting Costco (COST) by $5. BJ's also offers three add-on members for $30 each annually. BJ's top tier membership is priced at $110 per year, undercutting Costco by $10. Finally, BJ's offers an online

This article was written by

Lukas Wolgram profile picture
Check out my FREE substack newsletter Uncommon Profits here: https://lukewolgram.substack.com . Ranked #1 on Tip Ranks top 25 financial bloggers for accuracy as of January 1, 2021. I focus mostly on high quality small and microcap companies that I believe can double their stock price within 3 years (26% hurdle rate).

Analyst’s Disclosure: I am/we are long COST. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

Good article. It is an interesting stock at this price point with the current economic situation.
Lukas Wolgram profile picture
Agreed, thanks for the read!
crtag profile picture
this looks really cheap on a relative basis
Lukas Wolgram profile picture
Yeah, although it's not that much below market multiples, which I didn't mention in the article.
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