Core Viewpoint - BJ's Wholesale Club is positioned to capitalize on the growing wholesale retail market, which is expected to expand by 50% by 2033, despite facing competition from larger players like Costco and Walmart's Sam's Club [2][3]. Group 1: Company Overview - BJ's Wholesale Club has over 7.5 million paying members and 255 club locations as of Q1 2025, making it the smallest among the 'Big Three' wholesale clubs in the U.S. [5][3] - The company plans to open 25 to 30 new stores over the next two years, which would exceed the total openings of the previous three years combined [6]. Group 2: Financial Performance - In Q1 2025, BJ's reported net sales of $5 billion, a 4.7% year-over-year increase, and EPS of $1.14, surpassing expectations of $0.91 [7]. - BJ's gross margin expanded by 30 basis points year-over-year, and EPS grew over 34% year-over-year [7]. - The current P/E ratio for BJ's is 25.39, significantly lower than Costco's 55.75, indicating a more attractive valuation [4][16]. Group 3: Market Position and Competition - Costco has over 79 million paying members and operates 896 stores, significantly outpacing BJ's in scale and revenue [3][8]. - BJ's comp sales grew less than 3% in Q1 2025, while Costco's adjusted comp sales grew 8% year-over-year, highlighting the competitive pressure BJ's faces [9]. - Despite this, BJ's shares have increased by 27% over the last 12 months, outperforming Costco's 14% gain [13]. Group 4: Future Outlook - Analysts have a 12-month price target for BJ's at $116.12, suggesting a 7.27% upside from the current price of $108.25 [15]. - BJ's is expected to achieve a compound annual growth rate (CAGR) of 4.6% through 2033, indicating potential for healthy competition in the wholesale sector [15].

Consumer Sentiment and Economic Outlook - U.S. consumer sentiment declined in June, with the Conference Board's Consumer Confidence Index dropping by 5.4 points to 93.0 from 98.4 in May, indicating growing unease among households [1] - The Present Situation Index fell 6.4 points to 129.1, while the Expectations Index slipped 4.6 points to 69.0, reflecting concerns over job security and economic challenges [2] Trade Policies and Geopolitical Tensions - Ongoing concerns over trade policies, particularly tariffs, are a primary driver behind the decline in consumer confidence, as they are perceived as threats to economic stability [3] - Escalating geopolitical tensions have further weighed on consumer outlook [3] Company Performance and Positioning - Companies like Sprouts Farmers Market, Urban Outfitters, Costco, and BJ's Wholesale Club are better positioned to navigate shifts in consumer behavior despite the overall decline in consumer confidence [4][9] - Sprouts Farmers Market focuses on product innovation, competitive pricing, and a commitment to fresh, natural, and organic products, with a Zacks Consensus Estimate indicating sales growth of 13.7% and EPS growth of 35.5% for the current financial year [6][7] Urban Outfitters' Strategy - Urban Outfitters leverages its multi-brand strength and digital reach, with major brands showing momentum across channels, and a Zacks Consensus Estimate suggesting sales growth of 8.5% and EPS growth of 22.2% [11][12] Costco's Membership Model - Costco effectively navigates market fluctuations through strategic investments and a customer-centric approach, with a focus on high membership renewal rates and competitive pricing, expecting sales growth of 8.1% and EPS growth of 12% [12][13] BJ's Wholesale's Growth Drivers - BJ's Wholesale emphasizes membership growth and digital innovations, enhancing omnichannel capabilities and targeting high-growth regions, with a Zacks Consensus Estimate indicating sales growth of 5.5% and EPS growth of 6.2% [14][15]

Core Insights - Costco Wholesale Corporation (COST) has a market capitalization of approximately $444.3 billion and operates 905 warehouses globally, while BJ's Wholesale Club Holdings, Inc. (BJ) has a market capitalization of around $15.1 billion with 255 clubs and 190 gas locations [1][2] - Costco's membership renewal rates are high at 92.7% in the U.S. and Canada, and 90.2% globally, contributing to its competitive pricing and operational efficiency [3][4] - BJ's is expanding its footprint and refining its value proposition through localized assortments and digital capabilities, achieving an 8.1% increase in membership fee income in Q1 fiscal 2025 [2][9] Costco's Strengths - Costco's membership model ensures a reliable revenue stream, with membership fee income rising 10.4% year-over-year in Q3 fiscal 2025, and a total of 79.6 million paid household members, a 6.8% increase [4][3] - The company plans to open 27 new warehouses in fiscal 2025, increasing its global count to 914 [5] - E-commerce sales grew by 14.8% in Q3, with logistics deliveries up 31%, indicating strong online demand [6] BJ's Growth Strategy - BJ's focuses on marketing and merchandising, targeting high-growth regions and expanding its own-brand portfolio [8] - The company achieved a 35% increase in digitally enabled sales in Q1 fiscal 2025 and plans to add 25-30 new clubs over the next two years [11][12] - BJ's membership fee income reached $120.4 million in Q1, reflecting a strong membership base with a 90% tenured renewal rate [9][10] Financial Estimates - The Zacks Consensus Estimate for Costco's current fiscal year sales suggests an 8.1% year-over-year growth, with EPS expected to grow by 12% [14][15] - For BJ's, the current fiscal year sales estimate indicates a 5.5% growth, with EPS growth projected at 6.2% [16] Stock Performance and Valuation - Over the past three months, Costco's shares have advanced by 7.7%, while BJ's shares have risen by 3.2% [18] - Costco's forward P/E ratio is 51.19, compared to BJ's 25.62, indicating a higher valuation for Costco [19] Investment Outlook - Costco is viewed as a more compelling investment choice due to its global scale, customer loyalty, and consistent performance, while BJ's shows promise through expansion and digital innovation [21]

Core Insights - The previous investment stance on BJ's Wholesale Club Holdings (NYSE: BJ) was a hold rating due to high valuation concerns [1] - Recent developments have prompted a reevaluation of the investment approach, focusing on long-term investments while also considering short-term opportunities for alpha generation [1] - The investment strategy emphasizes bottom-up analysis to assess the fundamental strengths and weaknesses of individual companies, targeting those with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Retail Industry Overview - U.S. retail sales declined for the second consecutive month in May, falling 0.9% month over month to $715.4 billion, marking the steepest decline since January [1][8] - The decline in retail activity was primarily driven by a 3.5% drop in motor vehicle purchases, alongside notable decreases in building materials (down 2.7%) and gasoline (down 2%) [2][8] - More than half of the 13 major retail categories tracked reported lower sales in May, indicating broader weakness in consumer spending [2] Consumer Sentiment and Economic Factors - Tariff threats and geopolitical tensions are negatively impacting consumer sentiment, suggesting that the earlier spike in sales was a reaction to anticipated economic challenges rather than a sustained spending trend [3] - The current economic uncertainties are prompting a cautious approach among consumers, reflected in the recent retail sales data [3] Investment Opportunities in Retail Stocks - Companies such as Sprouts Farmers Market, Urban Outfitters, BJ's Wholesale Club, and Costco are identified as better positioned to navigate shifts in consumer behavior due to their strategic initiatives [3][8] Company-Specific Insights Sprouts Farmers Market (SFM) - SFM is focusing on product innovation, competitive pricing, and targeted marketing to expand its customer base and meet evolving consumer preferences [7] - The Zacks Consensus Estimate for SFM indicates a projected growth of 13.7% in sales and 35.5% in earnings per share (EPS) for the current financial year [8] Urban Outfitters (URBN) - URBN is leveraging its multi-brand strength and digital reach, with major brands showing momentum across both digital and physical channels [10] - The Zacks Consensus Estimate for URBN suggests growth of 8.5% in sales and 22.2% in EPS for the current financial year [11] BJ's Wholesale Club (BJ) - BJ's Wholesale is focusing on membership growth and digital innovations, enhancing its omnichannel capabilities and customer value [11] - The Zacks Consensus Estimate for BJ indicates growth of 5.5% in sales and 6.2% in EPS for the current financial year [12] Costco (COST) - Costco is effectively navigating market fluctuations through strategic investments and a strong emphasis on its membership model [13] - The Zacks Consensus Estimate for Costco forecasts growth of 8% in sales and 12% in EPS for the current financial year [14]

Core Insights - Costco Wholesale has delivered exceptional returns, with an investment of $10,000 in 1990 growing to over $400,000 today, highlighting its consistent performance [1] - Despite strong historical returns, Costco's current price-to-earnings (P/E) ratio of nearly 60 is the highest in over 30 years, raising concerns among investors about its valuation [2] - The article suggests three alternative companies—Floor & Decor, Academy Sports, and BJ's Wholesale Club—that share Costco's business model but are currently valued more attractively [4] Company Summaries Floor & Decor - Floor & Decor operates a high-volume business model similar to Costco, focusing on fewer, larger locations to enhance profitability [5] - The company experienced a 1.8% decline in same-store sales in Q1 2025, reflecting broader trends in the home improvement sector [6] - Despite the slowdown, Floor & Decor maintained a profit margin of 4% in Q1, indicating consistent profitability [7] - The company has plans to double its locations to 500, which could significantly enhance shareholder returns if executed well [8] Academy Sports - Academy Sports also follows a high-volume store model, with 303 locations and aims for first-year sales of $12 million to $16 million per new store, providing operational leverage [9] - The company plans to open 15 to 20 new locations in 2025, contributing to overall sales growth [10] - Academy Sports is currently trading at a P/E ratio of just 8, significantly lower than Costco's, making it an attractive investment option [11] - The company is rewarding shareholders through a growing dividend and stock buybacks, reducing its share count by 20% over the past three years [12] BJ's Wholesale - BJ's Wholesale is the most similar to Costco among the three companies, but it is trading at a valuation more than 50% cheaper than Costco [14] - The company has a strong membership model, with membership fee income increasing annually for 25 years and a renewal rate of 90% [17] - BJ's plans to open 25 to 30 new locations over the next two years, indicating potential for meaningful growth [18] - Overall, Floor & Decor, Academy Sports, and BJ's are positioned to potentially outperform Costco stock over the next five years due to better valuations and growth rates [19]

Industry Overview - The Zacks Consumer Products – Staples industry is facing challenges due to elevated living costs impacting household budgets, leading to cautious consumer spending and affecting sales across the industry [1][5] - Companies are also grappling with rising raw material prices and increased selling, general and administrative (SG&A) expenses [1][4] Demand and Strategic Initiatives - Despite the challenges, demand for essential consumer products remains strong, with industry leaders like Colgate-Palmolive, The Clorox Company, BJ's Wholesale Club, and Grocery Outlet leveraging strategic initiatives focused on innovation, cost optimization, and digital transformation [2][7] - Companies are refining operations to optimize revenue generation, enhancing e-commerce capabilities, and innovating to meet evolving consumer demands [7] Cost Pressures and Consumer Behavior - The industry is encountering higher costs across raw materials, labor, and transportation, which are weighing on profit margins [4] - Consumer spending volatility is heightened amid an uncertain macroeconomic backdrop, particularly affecting middle- and lower-income households [5] Currency and Market Position - Many industry players are susceptible to currency fluctuations due to their exposure to international markets, which can impact pricing and profit margins [6] - The Zacks Consumer Products – Staples industry currently holds a Zacks Industry Rank of 175, placing it in the bottom 29% of over 250 Zacks industries, indicating dim near-term prospects [8][10] Performance Metrics - Over the past year, the industry has underperformed compared to the S&P 500 Index, losing 1.9% against the S&P 500's growth of 9.2% [11] - The industry's current valuation is at a forward 12-month price-to-earnings (P/E) ratio of 20.46X, compared to the S&P 500's 21.89X and the sector's 17.66X [14] Company Highlights - **Colgate-Palmolive**: The company is benefiting from effective pricing strategies and ongoing productivity efforts, with a Zacks Consensus Estimate for current fiscal-year EPS at $3.65, indicating growth of 1.4% from the previous year [16][17] - **Clorox**: Positioned for long-term growth with a robust innovation pipeline and effective pricing strategies, the Zacks Consensus Estimate for Clorox's current fiscal-year EPS is $7.09, reflecting a growth of 14.9% from the year-ago period [20][21] - **BJ's Wholesale Club**: The company is focused on membership growth and digital innovations, with a Zacks Consensus Estimate for current fiscal-year EPS at $4.30, indicating growth of 6.2% from the previous year [24][25] - **Grocery Outlet**: Strengthening its market position through diverse product offerings and expanding e-commerce capabilities, the Zacks Consensus Estimate for Grocery Outlet's current fiscal-year EPS is 74 cents, indicating a decline of 3.9% from the year-ago period [27][29]

Group 1 - Zacks Premium provides various tools for investors to enhance their stock market strategies, including daily updates, research reports, and stock screens [1][2] - The Zacks Style Scores are complementary indicators that help investors select stocks likely to outperform the market in the short term [2][3] Group 2 - Each stock is rated from A to F based on value, growth, and momentum characteristics, with A being the highest score indicating better chances of outperforming [3] - The Value Score focuses on identifying undervalued stocks using financial ratios like P/E and Price/Sales [3][4] - The Growth Score emphasizes a company's financial health and future growth potential based on earnings and sales projections [4] - The Momentum Score assesses stocks based on price trends and earnings estimate changes to identify favorable buying opportunities [5] Group 3 - The VGM Score combines all three Style Scores, providing a comprehensive indicator for investors looking for attractive value, growth, and momentum [6] - The Zacks Rank utilizes earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks achieving an average annual return of +25.41% since 1988 [7][8] Group 4 - BJ's Wholesale Club has become a preferred shopping destination by simplifying product assortments and enhancing digital capabilities, leading to increased membership signups [12] - The company offers significant savings on groceries compared to traditional supermarkets, with a focus on value for customers [12] - BJ's Wholesale Club holds a 2 (Buy) rating on the Zacks Rank and has a VGM Score of A, indicating strong investment potential [13][14] - The company has a forward P/E ratio of 26.03 and has seen upward revisions in earnings estimates, with a Zacks Consensus Estimate of $4.29 per share for fiscal 2026 [13]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates involves significant risk and volatility [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score system aids in identifying promising growth stocks by analyzing real growth prospects beyond traditional metrics [2] - BJ's Wholesale Club is currently highlighted as a recommended growth stock, possessing a favorable Growth Score and a top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is a critical factor for growth investors, with double-digit growth being particularly attractive [3] - BJ's historical EPS growth rate stands at 10.4%, with projected EPS growth of 6% this year, surpassing the industry average of 4.6% [4] Group 3: Cash Flow Growth - Higher-than-average cash flow growth is essential for growth-oriented companies, enabling expansion without relying on external funding [5] - BJ's year-over-year cash flow growth is currently at 5.3%, exceeding the industry average of 3.3% [5] - The company's annualized cash flow growth rate over the past 3-5 years is 17.1%, compared to the industry average of 5.5% [6] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions correlate strongly with near-term stock price movements [7] - BJ's current-year earnings estimates have been revised upward, with the Zacks Consensus Estimate increasing by 1.5% over the past month [7] Group 5: Overall Assessment - BJ's has achieved a Zacks Rank of 2 and a Growth Score of A, indicating its potential as a solid choice for growth investors [9]

Core Insights - Investors in the Consumer Products - Staples sector may consider BJ's Wholesale Club (BJ) and Hermes International SA - Unsponsored ADR (HESAY) as potential value opportunities [1] - A strong Zacks Rank combined with a good Value grade is identified as an effective strategy for discovering value stocks [2] Valuation Metrics - Both BJ and HESAY currently hold a Zacks Rank of 2 (Buy), indicating positive earnings estimate revisions and an improving earnings outlook for both companies [3] - BJ has a forward P/E ratio of 26.01, while HESAY has a significantly higher forward P/E of 55.44 [5] - BJ's PEG ratio is 3.28, which is more favorable compared to HESAY's PEG ratio of 5.79, indicating better expected earnings growth relative to its price [5] - BJ's P/B ratio stands at 7.48, while HESAY's P/B ratio is 15.51, further suggesting that BJ is undervalued compared to HESAY [6] - Based on these valuation metrics, BJ is rated as a superior value option with a Value grade of B, while HESAY has a Value grade of F [6]