BJ's Wholesale Club Holdings, Inc. (NYSE: BJ) reported first-quarter revenue of $5.66 billion, a 9.9 percent year-over-year increase that surpassed analyst estimates, driven by strong fuel demand and record membership fee income.
"Our strong start to fiscal 2026 underscores the resilience of our business model and the value we provide to our members," CEO Bob Eddy said during the company's earnings call. He emphasized the company’s strategic expansion into Texas and the strength of its membership model as key growth drivers.
The wholesale club operator posted adjusted earnings of $1.10 per share, beating the Zacks Consensus Estimate of $1.04. However, shares fell more than 4 percent in pre-market trading as investors reacted to a decline in merchandise margins.
The company's stock slide occurred despite the top-and-bottom-line beat, as merchandise gross margins fell by approximately 10 basis points. Management attributed the decline to investments in pricing, which were partially funded by returning tariff refunds to customers. Excluding the tariff benefits, merchandise margins were down 60 basis points.
A major driver for the quarter was the company's gasoline business. As fuel prices rose nearly 50 percent from the start to the end of the quarter, BJ's saw a surge in traffic at its pumps. Comparable gasoline gallons sold increased by nearly 8 percent, significantly outperforming a broader market where same-store gallons were down roughly 4 percent. This influx of fuel customers, however, did not translate into a meaningful increase in in-club shopping trips.
Membership fee income hit a record $132.4 million, up 9.9 percent year-over-year, supported by a 90 percent renewal rate among tenured members and strong growth in higher-tier memberships. The company also highlighted a successful expansion into Texas, with new clubs in the Dallas-Fort Worth market tracking 33 percent ahead of membership plans.
Management observed a split in consumer behavior, with most of the sales growth coming from higher-income members. In response, CEO Bob Eddy said the company plans to shift its product assortment "upmarket" to feature more "better and best" items to cater to its more affluent shoppers.
BJ's reiterated its full-year fiscal 2026 guidance, projecting a 2 to 3 percent increase in comparable club sales (excluding gasoline) and adjusted earnings per share between $4.40 and $4.60.
The results show BJ's is successfully capturing market share in fuel and growing its member base, but faces the challenge of balancing value investments with protecting margins. Investors will watch the company's Q2 results to see if the pricing strategy drives sufficient sales growth to offset the margin pressure.
This article is for informational purposes only and does not constitute investment advice.
