On Thursday, TD Cowen affirmed its positive stance on shares of BJ's Wholesale Club Holdings Inc (NYSE: NYSE:BJ), with a revised price target suggesting confidence in the company's growth potential. The target was increased to $115 from the previous $110, while the Buy rating was maintained.
The firm highlighted BJ's as a compelling growth story due to its ability to expand from a current base of 250 clubs. The retailer plans to add over 50 new locations within the next five years, which is expected to drive low double-digit earnings per share growth.
The analyst from TD Cowen pointed to several key factors that could support BJ's momentum moving forward. These include the introduction of new general merchandise, improvements in fresh produce offerings, and an appropriately sized grocery and consumables selection.
These initiatives are part of the retailer's strategy to attract and retain customers, contributing to both unit expansion and comparable sales growth, each forecasted in the mid-single digits.
The report also reflects a broader optimism for the wholesale club sector, which is considered attractive due to its defensive characteristics, such as the stability provided by grocery sales and membership models.
Moreover, there is potential for offensive gains through higher-margin discretionary merchandise. The firm's analysis indicates that wholesale clubs have been outperforming traditional grocery stores, with a three-year compounded annual growth rate (CAGR) of 7% compared to grocery's 5%.
BJ's Wholesale is positioned as a strong mid-sized player in the market, with the analyst noting the company's multiple initiatives, or "irons in the fire," that could contribute to its competitive edge. In fiscal year 2023, wholesale clubs accounted for 9% of retail sales, representing a $650 billion market, while grocery stores captured 12%, equivalent to an $880 billion market.
The data underscores the significant market share and growth opportunities available to companies like BJ's Wholesale.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.