$BJ DD

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by Conny-Bravo

Here’s a short, sweet and straight to the point thesis for those who don’t want to read my ramblings. BJ’s has been consolidating for over a month now and I think calls will print. Earnings are 11/19 and I am expecting movement leading up to earnings. For the those who are still reading this, I’ve rendered a mediocre at best DD in an edible induced stupor for you to enjoy. Well, let’s get to it.

Not That Kind of BJ

BJ’s Wholesale Club Holdings, Inc. and its wholly owned subsidiaries is a leading warehouse club operator in the eastern United States. As of August 1, 2020, the Company operated 219 warehouse clubs and 148 gas stations in 17 states.

How BJ’s makes money (shown in % of sales)

  • Perishable’s: 32%
  • Edible Grocery 27%
  • Non-edible Grocery 24%
  • General merchandise 17%

The Bullish Case

Everyone and their mother knows grocers and warehouse chains are benefiting from the COVID lockdown, but has the train run out of steam? Here are highlights from their most recent earnings report in August:

  • Income from continuing operations increased by 96.5% year-over-year to $106.7 million, for the second quarter of fiscal 2020.
  • Adjusted EBITDA increased by 41.6% year-over-year to $216.9 million, for the second quarter of fiscal 2020.
  • Earnings per diluted share of $0.76, reflects a 94.9% year-over-year growth.
  • Adjusted earnings per diluted share of $0.77, reflects 97.4% year-over-year growth.
  • Net cash provided by operating activities was $733.7 million and free cash flow was $654.8 million, for the first half of fiscal 2020.
  • Company recognizes dedication of BJ’s team members and invests $31.4 million and $82.7 million in wages and bonuses, quarter to date and year to date, respectively.

$COST has gone up 10% since their earnings on 9/24, but BJ’s is a different beast.

Comparing $COST and $BJ

  • $BJ’s revenue was 13.2B last year – $COST revenue was 166.7B or 7.9% of Costco’s revenue
  • $BJ has 5.5 million paid memberships – $COST has 105 mil or 5.2% of Costco’s memberships
  • $BJ has 219 stores in the US – $COST has 795 or 27.5% of Costco’s locations

Risks

  • Volatility going into the election doesn’t really help any earnings plays
  • Could go tits up

Conclusion

BJ’s consolidating for over a month. Technical indicators smell bullish. Earnings 11/19. Buy calls.

Positions: If you want to play it safe, 12/18 45/50c. For max tendies, 11/20 45c/50c

*not financial advice

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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