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BJ's Stock Leaps After Q1 Earnings Beat As Bulk Discount Retailer Keeps Lid On Costs Amid Inflation Surge

"Our business model remains more relevant than ever in the current inflationary environment,” said CEO Bob Eddy.

Updated at 10:09 am EST

BJ's Wholesale Club  (BJ) - Get BJ's Wholesale Club Holdings Inc. Report posted stronger-than-expected first quarter earnings Thursday as the smaller bulk-discount rival to Costco  (COST) - Get Costco Wholesale Corporation Report kept a lid on cost increases that plagued profit updates from retailing giants Target  (TGT) - Get Target Corporation Report and Walmart  (WMT) - Get Walmart Inc. Report.

BJ's said earnings for the three months ending in April came in at 82 cents per share, up 39% from the same period last year and firmly ahead of the Street consensus forecast of 72 cents. Group revenues, BJ's said, rose 16.3% from last year to $4.4 billion and came in just ahead of analysts'- estimates of a $4.24billion tally. 

Same store sales that don't include gasoline sales rose 4.1% from last year, BJ's said, compared to forecasts of a 2% gain, while membership fees rose 11.9% to $96.6 million. Looking into the 2023 financial year, which ends in January, BJ's reiterated its forecast of flat annual earnings.

“Our performance in the first quarter was strong, as gains in member traffic underscored the value we provide. Our business model remains more relevant than ever in the current inflationary environment,” said CEO Bob Eddy. “We also continued to build on the transformational gains we have driven over the last two years,” continued Mr. Eddy. “Our membership has never been stronger. We reached 6.5 million members in the first quarter, which serves as a testament to the value that we consistently deliver to our members."

"Our digital business remains a key competitive advantage. We’re quickly expanding our footprint and we recently closed the acquisition of our perishable distribution network, which will support our future growth efforts and drive long-term shareholder value,” he added.

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BJ's shares were marked 9.3% higher in early trading following the earnings release to indicate an opening bell price of $58.41 each, a move that would trim the stock's year-to-date decline to around $10.4%.

BJ's broader costs were up 6% from last year at $635.4 million, the company said, "primarily driven by increased labor costs as a result of last year’s wage investments" , while merchandise margins fell 30 basis points from last year and were impacted by "increased freight costs and tactical investments in inflationary categories."

Still, the cost increases offered a stark contrast to the issues that hit Walmart and Target earlier this week, triggering the biggest single-day declines for each of their shares since 1987.

Target's first quarter expenses were up 18.9%, the company said yesterday, while Walmart noted that operating expenses as a percentage of net sales increased 45 basis points, "primarily due to increased wage costs in Walmart U.S."

U.S. retail sales growth steadied in April, data from the Commerce Department indicated earlier this week, rising to a collective tally of $677.7 billion as record high gas prices and surging inflation failed to deter spending in the world's biggest economy.

U.S. inflation eased modestly from the fastest pace in four decades last month, but core consumer price pressures continued to bubble higher, suggesting a longer-than-expected run of elevated readings in the world's biggest economy.

So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.6% on the month, and 6.2% on the year, near the highest since February of 1991.

Huge increases in airfares, which were up 33% from last year, as well as used car prices and veterinary fees and delivery service costs contributed to the core price gains, which suggest inflation pressures may be more deeply imbedded.