Economic Indicators - US MBA mortgage applications fell by -12.7% in the week ended September 26, with the purchase mortgage sub-index down -1.0% and the refinancing sub-index down -20.6% [1] - The September ISM manufacturing index rose +0.4 to a 7-month high of 49.1, exceeding expectations of 49.0 [6] - The September ADP employment change unexpectedly fell by -32,000, marking the largest decline in 2.5 years, while August was revised lower to -3,000 from +54,000 [5] Market Reactions - Stocks initially moved lower due to the US government shutdown, but later recovered, with the S&P 500 and Nasdaq 100 reaching new all-time highs [2][4] - The dollar index fell to a one-week low, while gold prices climbed to a record high amid risk-off sentiment [2] - Rising corporate earnings expectations are a bullish backdrop for stocks, with over 22% of S&P 500 companies providing guidance for Q3 earnings that are expected to beat analysts' expectations [8] Sector Performance - Pharmaceutical stocks rallied, with AstraZeneca closing up more than +9% and Eli Lilly up more than +8%, driven by hopes from Pfizer's deal with the US government [15] - Chipmakers and AI-infrastructure stocks also saw gains, with Super Micro Computer closing up more than +9% and Micron Technology up more than +8% [16] - Grocery retailers declined after Amazon announced a new private-label food brand, leading to Dollar Tree and Dollar General closing down more than -4% and -3% respectively [22] Upcoming Economic Data - Weekly initial unemployment claims are expected to increase by +7,000 to 225,000, and August factory orders are expected to rise by +1.4% month-over-month [9] - September nonfarm payrolls are anticipated to increase by +51,000, with the unemployment rate expected to remain unchanged at 4.3% [9]

Core Insights - BJ's Wholesale Club Holdings, Inc. is significantly advancing its digital transformation, with a 34% increase in digitally enabled comparable sales in Q2 of fiscal 2025, resulting in a two-year stacked increase of 56% [1][7] - The company processes over 90% of digital orders through its clubs, enhancing efficiency and member loyalty, with digitally engaged customers being twice as valuable as traditional shoppers [2][7] - Membership has reached an all-time high of 8 million, with higher-tier memberships representing 41% of the base, indicating deeper engagement [3] Digital Strategy - The mobile app plays a central role in member engagement, with over half of members using it for various services, contributing to record membership fee income of $123.3 million, a 9% year-over-year increase [2][7] - The hybrid model of integrating physical clubs with online services is a key differentiator for BJ's, positioning the company to capture long-term growth opportunities [6] Competitive Landscape - Competitors like Walmart and Costco are also enhancing their digital capabilities, with Walmart reporting a 25% increase in e-commerce sales and Costco achieving a 15.6% growth in e-commerce comparable sales for the fiscal year [4][5] - BJ's faces the challenge of sustaining its momentum against these formidable competitors while continuing to expand its digital capabilities [6]

Market Trends - Warehouse clubs are expanding locations and attracting more shoppers despite retailers facing higher costs from tariffs [1] - Warehouse clubs are attracting younger customers through convenient online shopping, appealing merchandise, and affordable meals [2] Customer Demographics - Gen Z and Millennials account for approximately 50% of Sam's Club's new members over the past 2 years [3] - Costco's average customer age is decreasing, with nearly 50% of new members being under 40 years old [3] Business Strategies - Sam's Club is offering delivery services for items like rotisserie chickens and hot pizzas [2]

Core Viewpoint - The investment outlook for BJ's Wholesale Club Holdings (NYSE: BJ) has been upgraded to a buy rating due to improved valuation and strong fundamentals [1] Group 1: Investment Strategy - The investment approach focuses on long-term investments while also incorporating short-term shorts to identify alpha opportunities [1] - The analysis is based on bottom-up evaluation, examining the fundamental strengths and weaknesses of individual companies [1] - The investment duration is medium to long-term, targeting companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Group 1: Company Performance - TimesSquare Capital Management reported a gross return of 11.28% and a net return of 11.02% for its "U.S. Small Cap Growth Strategy" in Q2 2025, compared to the Russell 2000 Growth Index return of 11.97% [1] - BJ's Wholesale Club Holdings, Inc. (NYSE:BJ) had a one-month return of -5.27% but gained 20.67% over the last 52 weeks, closing at $97.44 per share with a market capitalization of $12.838 billion on September 10, 2025 [2] - BJ's Wholesale Club reported net sales of approximately $5.3 billion in Q2 2025, reflecting a growth of 3.4% year-over-year [4] Group 2: Investment Insights - The investment strategy for BJ's Wholesale Club focuses on value-oriented or specialty retailers, with strong momentum in consumables despite a slight decline in seasonal big-ticket categories [3] - Management's decision to maintain full-year guidance was viewed as conservative, and the company added to its position in BJ's following a -6% pullback [3] - Although BJ's is not among the 30 most popular stocks among hedge funds, it saw an increase in hedge fund portfolios holding its stock from 43 to 44 in the last quarter [4]

Core Insights - Zacks Premium offers various tools for investors to enhance their stock market engagement and confidence [1] - The Zacks Style Scores are designed to help investors select stocks with the highest potential to outperform the market in the short term [2] Zacks Style Scores Overview - Stocks are rated from A to F based on value, growth, and momentum characteristics, with A being the highest score [3] - The Style Scores are categorized into four types: Value Score, Growth Score, Momentum Score, and VGM Score [3][4][5][6] Value Score - The Value Score identifies attractive stocks using financial ratios such as P/E, PEG, and Price/Sales, focusing on undervalued stocks [3] Growth Score - The Growth Score evaluates stocks based on projected and historical earnings, sales, and cash flow to identify sustainable growth opportunities [4] Momentum Score - The Momentum Score helps investors capitalize on price trends, utilizing metrics like weekly price changes and monthly earnings estimate shifts [5] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for selecting stocks with strong value, growth, and momentum [6] Zacks Rank Integration - The Zacks Rank uses earnings estimate revisions to simplify portfolio building, with 1 (Strong Buy) stocks historically yielding an average annual return of +23.75% since 1988 [7][8] - To maximize returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [9] BJ's Wholesale Club Analysis - BJ's Wholesale Club has become a preferred shopping destination, focusing on simplifying product assortments and enhancing digital capabilities [11] - The company is rated 3 (Hold) on the Zacks Rank, with a VGM Score of A and a Growth Style Score of B, indicating a projected year-over-year earnings growth of 6.7% for the current fiscal year [12] - BJ's earnings estimates have been revised upward, with a Zacks Consensus Estimate of $4.32 per share and an average earnings surprise of +16.4% [12][13]

Core Insights - BJ's Wholesale Club Holdings, Inc. is significantly enhancing its digital capabilities, with a 34% year-over-year increase in digitally enabled comparable sales in Q2 fiscal 2025, and a two-year stacked growth of 56% [1][8] - The company is focusing on integrating e-commerce with its physical stores, utilizing services like buy online pick up in club and same-day delivery to drive member engagement and retention [1][3] Digital Engagement and Membership Growth - Over 90% of digital orders are fulfilled by clubs, indicating a strong integration of online and in-store experiences [2][8] - Digitally engaged members are considered twice as valuable as in-club-only shoppers, leading to larger basket sizes and stronger renewal rates [2] - Membership reached a record 8 million, with higher-tier membership penetration at 41%, contributing to a record membership fee income of $123.3 million, up 9% from the previous year [2][3][8] Strategic Focus and Future Growth - The digital strategy aligns with BJ's broader goal of enhancing convenience and improving member retention, positioning the company well amid changing consumer habits [3][4] - Continued investment in digital capabilities is seen as essential for future growth, particularly as consumer preferences shift towards hybrid retail experiences [4] Comparative Industry Performance - BJ's Wholesale Club stock has increased by 24.7% over the past year, contrasting with a 10.4% decline in the industry [7] - The company's forward 12-month price-to-earnings ratio is 21.81, higher than the industry average of 20.12, indicating a premium valuation [9] Financial Estimates - The Zacks Consensus Estimate for BJ's current financial-year sales implies a year-over-year growth of 4.9%, while earnings per share are expected to grow by 6.7% [10] - Current quarter sales are estimated at $5.37 billion, with a year-over-year growth estimate of 5.39% [13]

Financial Performance - Net sales for the second quarter of fiscal year 2025 were $5.3 billion, a 3.2% increase from $5.1 billion in the same period of fiscal year 2024[103]. - Operating income for the second quarter of fiscal year 2025 was $216.5 million, compared to $203.7 million in the same period of fiscal year 2024[101]. - Net income for the second quarter of fiscal year 2025 was $150.7 million, an increase from $145.0 million in the same period of fiscal year 2024[101]. - Adjusted net income for Q2 FY2025 was $151.5 million, up from $146.3 million in Q2 FY2024, with adjusted EPS increasing to $1.14 from $1.09[130]. - Adjusted EBITDA for Q2 FY2025 was $303.9 million, compared to $281.3 million in Q2 FY2024, and $589.7 million in the first six months of FY2025 compared to $517.7 million in the same period last year[134]. Membership and Fees - Membership fee income for the trailing twelve months ended August 2, 2025, was $475.7 million, reflecting over 25 consecutive years of growth in membership fee income[92]. - The annual membership fee for Club Card membership increased from $55 to $60 prior to January 1, 2025, while Club+ membership fees increased from $110 to $120[92]. - Membership fee income increased by 9.0% to $123.3 million in Q2 FY2025 compared to $113.1 million in Q2 FY2024, and by 8.6% to $243.7 million in the first six months of FY2025 compared to $224.5 million in the same period last year[111]. Sales and Operations - Comparable club sales decreased by 0.3% in the second quarter of fiscal year 2025, while merchandise comparable club sales increased by 2.3%[107]. - The company operates 255 clubs and 191 gas stations across 21 states as of the date of this filing, with a net increase of 11 clubs from the prior year[91]. - Cost of sales was $4.4 billion, or 83.2% of net sales, in Q2 FY2025, compared to $4.2 billion, or 83.4% of net sales, in Q2 FY2024, with merchandise gross margin rate increasing by 10 basis points[114]. Cash Flow and Investments - Net cash provided by operating activities for the second quarter of fiscal year 2025 was $249.9 million, up from $221.4 million in the same period of fiscal year 2024[101]. - Net cash provided by operating activities was $458.0 million for the first six months of FY2025, an increase from $422.2 million in the same period last year[139]. - Net cash used in investing activities was $306.2 million for the first six months of FY2025, compared to $239.6 million in the same period last year, driven by increased capital spending[141]. - Adjusted free cash flow for Q2 FY2025 was $87.3 million, relatively flat compared to $87.5 million in Q2 FY2024[144]. - For the first six months of FY2025, adjusted free cash flow decreased to $154.9 million from $182.6 million in the same period of FY2024, primarily due to increased capital spending[144]. Expenses and Taxation - SG&A expenses increased by 4.8% to $786.4 million in Q2 FY2025 from $750.3 million in Q2 FY2024, and by 5.1% to $1.55 billion in the first six months of FY2025 from $1.47 billion in the same period last year[118]. - Pre-opening expenses were $3.3 million in Q2 FY2025 compared to $2.6 million in Q2 FY2024, and $8.3 million in the first six months of FY2025 compared to $3.4 million in the same period last year[122]. - Interest expense, net decreased to $10.4 million in Q2 FY2025 from $12.8 million in Q2 FY2024, and to $21.5 million in the first six months of FY2025 from $26.7 million in the same period last year[124]. - The effective income tax rate increased to 26.9% in Q2 FY2025 from 24.1% in Q2 FY2024, and to 24.6% in the first six months of FY2025 from 24.2% in the same period last year[125][126]. Debt and Financing - As of August 2, 2025, total debt outstanding was $505.0 million, including $105.0 million under the ABL Revolving Facility and $400.0 million under the First Lien Term Loan[156]. - The interest rate on the ABL Revolving Facility was 5.45%, while the First Lien Term Loan had an interest rate of 5.88%[149][150]. - Unused capacity under the ABL Revolving Facility was $1.0 billion as of August 2, 2025[149]. - A 100 basis point change in prevailing market rates would result in an annual interest cost change of approximately $5.1 million[156]. - The company entered into an ABL Revolving Facility with an aggregate commitment of $1.2 billion, maturing on July 28, 2027[146]. - The Fifth Amendment of the First Lien Term Loan provided for a new tranche of term loans totaling $400.0 million, reducing the applicable margin from SOFR plus 200 basis points to SOFR plus 175 basis points[148]. - There were no material changes to the company's cash commitments from those described in the Annual Report for FY2024[151].

Core Viewpoint - The overall performance of the retail sector in Q2 shows resilience, but the outlook for the second half of the year is cautious due to uncertainties such as tariff impacts and potential price increases [1] Group 1: Q2 Performance - A majority of retail companies exceeded expectations in same-store sales, gross margin, and operating margin, with 57% of companies surpassing same-store sales forecasts and 50% exceeding gross and operating margin expectations [1] - Major retailers such as Home Depot (HD.US), Lowe's (LOW.US), Target (TGT.US), and Walmart (WMT.US) reported solid growth [1] Group 2: Guidance and Outlook - Only 36% of companies raised their full-year EPS guidance midpoint, while most chose to maintain or lower their forecasts, indicating management's concerns about inflation transmission, rising tariff costs, and consumer uncertainty [1] - Companies generally believe that the impact of tariffs will become fully apparent in Q4 [1] Group 3: Analyst Ratings - Goldman Sachs maintains a "Buy" rating on BJ's Wholesale Club (BJ.US), Home Depot, Lowe's, and Walmart, citing their strategies and market positions as favorable; Target is rated "Neutral" [1]

Core Insights - BJ's Wholesale Club reported second-quarter adjusted earnings per share of $1.14, exceeding the analyst consensus estimate of $1.09, while quarterly sales of $5.38 billion (+3.4% year over year) fell short of the expected $5.48 billion [1] - The company raised its fiscal year 2025 adjusted EPS guidance to $4.20–$4.35 from the previous range of $4.10–$4.30, which is slightly below the Street estimate of $4.31 [2] - Comparable club sales for fiscal year 2025, excluding gasoline sales, are projected to increase by 2.0% to 3.5% year-over-year [3] Analyst Ratings and Price Targets - UBS analyst Mark Carden maintained a Buy rating on BJ's Wholesale and lowered the price target from $135 to $125 [5] - DA Davidson analyst Michael Baker also maintained a Buy rating, reducing the price target from $140 to $123 [5] - Morgan Stanley analyst Simeon Gutman kept an Equal-Weight rating and cut the price target from $125 to $115 [5] - JP Morgan analyst Christopher Horvers maintained a Neutral rating and lowered the price target from $113 to $110 [5] - Citigroup analyst Paul Lejuez maintained a Buy rating and reduced the price target from $120 to $115 [5] - Evercore ISI Group analyst Greg Melich maintained an In-Line rating and lowered the price target from $117 to $110 [5]