Membership Growth And Club Expansion Will Drive Retail Demand

Key Takeaways

• Accelerated membership and footprint expansion in new markets strengthens recurring income and supports long-term revenue and margin growth.
  
• Growing digital adoption and enhanced merchandising increase customer loyalty, shopping frequency, and operational efficiency amidst value-focused consumer trends.
  
• Macroeconomic pressures, shifting consumer behavior, and rising costs threaten revenue growth, margins, and long-term relevance, while demographic trends could structurally challenge BJ's bulk-buying business model.

Catalysts

Operates membership warehouse clubs on the eastern half of the United States.

• Accelerating membership growth, particularly in higher-tier memberships and underpenetrated secondary markets, is likely to boost recurring revenues and expand BJ's addressable market, providing a strong base for future earnings growth.
  
• Expansion of BJ's physical footprint, with 25–30 new clubs planned over two years, especially in high-growth suburban and Sunbelt markets, supports sustained topline revenue growth and fixed cost leverage, which helps drive margin expansion.
  
• Robust digital adoption-evidenced by 34% quarterly digital sales growth and broad penetration of digital services like BOPIC and ExpressPay-positions BJ's to capture more shopping occasions and larger baskets as omnichannel shopping continues to rise, supporting both revenue and operating efficiencies.
  
• Ongoing investments in Fresh 2.0 (perishables, meat, and seafood), private label, and data-driven merchandising are increasing customer loyalty, improving basket size, and lifting gross margin rates, all of which are likely to result in higher long-term net margins.
  
• The current economic environment, marked by persistent inflation and elevated value-seeking consumer behavior, is driving increased traffic-particularly among lower income households-validating BJ's value proposition and supporting market share gains that should translate into higher revenues and durable earnings resilience.

BJ's Wholesale Club Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming BJ's Wholesale Club Holdings's revenue will grow by 6.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 2.8% today to 2.7% in 3 years time.
• Analysts expect earnings to reach $683.1 million (and earnings per share of $5.4) by about September 2028, up from $578.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 26.8x on those 2028 earnings, up from 22.2x today. This future PE is greater than the current PE for the US Consumer Retailing industry at 21.7x.
• Analysts expect the number of shares outstanding to decline by 0.63% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

BJ's Wholesale Club Holdings Future Earnings Per Share Growth

Risks

• The company is experiencing increased caution in its inventory and order levels, particularly in discretionary general merchandise categories impacted by tariffs, which could constrain revenue growth if consumer sentiment unexpectedly improves, and over-prudence may limit top-line upside.
  
• Tariff-related macro volatility and ongoing uncertainty about consumer behavior are creating a more dynamic and risk-prone environment; management explicitly stated that these headwinds are likely to limit upside and may require short-term investments (e.g., sharper pricing), which could negatively affect net margins and earnings.
  
• There is a continued struggle with underperformance in the general merchandise and services division (2.2% comp decline this quarter), with challenges in transforming this business for greater relevance; if this trend persists, it could weigh down average basket size and future revenue growth.
  
• Long-term margin pressures loom due to increased SG&A expense deleverage from new club openings amid rising labor and operational costs, as well as the potential for intensifying price competition in warehouse retail, which could erode operating margins and overall profitability.
  
• Secular trends such as demographic shifts toward smaller households and increased sustainability/anti-consumption sentiment among younger generations may reduce consumer demand for bulk-buying over time, creating a structural headwind to membership growth and revenue across BJ's core business model.

Valuation

• The analysts have a consensus price target of $115.632 for BJ's Wholesale Club Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $130.0, and the most bearish reporting a price target of just $70.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $25.2 billion, earnings will come to $683.1 million, and it would be trading on a PE ratio of 26.8x, assuming you use a discount rate of 7.1%.
• Given the current share price of $97.53, the analyst price target of $115.63 is 15.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.