Our BJ's Wholesale Club Pick Is Playing Out. The Stock Has More Upside. -- Barrons.com

By Dan Victor

Our BJ's Wholesale Club Holdings pick has returned 10% since we recommended it in January, outperforming the 2% increase in the small-cap-focused Russell 2000 Index. BJ's stock has also edged out both Costco Wholesale and Walmart, up about 2% and 1%, respectively, in the same period.

Our original thesis is still in the early innings. BJ remains undervalued next to its larger warehouse-club peers, while packing a solid growth outlook. We're still bullish, and see plenty of reasons for the stock to keep climbing into 2027.

The warehouse-club shopping model is resonating as consumers seek out deals against a backdrop of elevated gas prices and higher interest rates. BJ's operates 267 membership clubs and 206 gas stations, maintaining a stronghold in the northeastern U.S., where it commands a denser footprint than larger rivals. Building on that foundation, the company has been expanding into new states, across the southeast and Midwest in recent years.

Financial results reinforce the momentum. In its fiscal second quarter, BJ's posted total revenue of $6.23 billion, up 15.7% year-over-year, driven by what management described as "growth in traffic, units sold, and market share gains." Even as the surge in gasoline prices boosted fuel sales and the top line, BJ's posted merchandise comparable club sales growth of 3.1% excluding gasoline. That was notably ahead of Walmart, which last said U.S. comparable-store sales growth excluding fuel in its second quarter was 2.6%.

BJ's membership fee income rose nearly 10% as the member base hit a record 8.5 million, capturing the impact of a five dollar price hike to the standard annual membership last year, BJ's first price increase since 2018. Other strategic initiatives gaining traction include digitally-enabled sales through an online app, now representing 16% of its total merchandise business. Management is targeting full-year adjusted EPS guidance of $4.60 to $4.80, representing an increase of 7% at the midpoint over last year.

D.A. Davidson analyst Michael Baker has been bullish on the stock, reaffirming a Buy rating with a $108 price target earlier this month. In his Oct. 8 research report, Baker recapped his research visit to Texas, where he toured by bus several retailers including stops at BJ's, Costco, and Sam's Club.

By all accounts, BJ's four new Texas locations have been a success, with management expressing confidence the experience proves it can compete in new markets.

BJ's "could once again accelerate the pace of new store openings," says Baker, adding to its growth potential. The current plan to open 25 to 30 clubs across 2027 and 2028 represents a 5% annual expansion rate. The possibility of an update to the company's plans for new club openings looking out to 2029 and beyond, projecting confidence into the long-term outlook, could be a catalyst for the stock to rerate higher.

Trading at a forward price to earnings ratio of 21, we think BJ's remains a bargain next to Walmart at 39x and Costco at 44x. BJ's smaller profile may represent an advantage in capitalizing on opportunities to gain market share in this important consumer staples industry. There are certainly key differences across each business, but for exposure to the ongoing resiliency of consumer spending, BJ's may be the better bet.

Keep this one in your shopping cart.

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October 16, 2026 00:10 ET (04:10 GMT)