Some analysts think it has another 20%-plus worth of upside.
It has been a challenging year for investors, as the Magnificent Seven and many of the high-fliers of the past two years have been sinking.
But that doesn’t mean there aren’t stocks that are outperforming, you just need to know where to look for them. The sector that has been one of the top performers this year is consumer staples.
Consumer staples are typically considered boring stocks because they include companies that sell or manufacture everyday items, like groceries, beverages, food, household products, cleaning supplies, tobacco, and the like. They are called consumer staples because they are staples for the average consumer, whether its in good times or bad.
However, consumer staples have been anything but boring this year, as have topped every other sector except healthcare.
One of the top performing consumer staples stocks this year is BJ’s Wholesale Club (NYSE:BJ). Like Costco, it is membership-based, offering food, groceries, and household items in bulk, as well as clothing, appliances, electronics, and cheap gas for its members.
BJ’s stock is up some 22% year-to-date and around 50% over the past 12 months, trading at about $110 per share. And it should still have some room to run, as we head into a potentially slowing economy.
Earnings beat estimates
BJ’s reported fourth quarter and full year earnings last week that beat estimates. The company generated $5.28 billion in revenue, which was down 1% year over year but on par with estimates. Adjusted net income was $124 million, or 93 cents per share, which was down 16% year over year but beat estimates of 88 cents per share.
For the full year, BJ’s saw revenue climb 3% to $20.5 billion, and earnings jump 3% to $4.00 per share.
While the year-over-year numbers may not seem all that impressive, if you look inside the results, there were some positive signs.
One, comparable club sales increased by 4.0% in the fourth quarter and 2.5% for the full fiscal year, respectively. If you exclude the impact of gasoline sales, comparable club sales increased by 4.6% in Q4 and 2.8% in fiscal 2024, respectively.
Another positive was that membership fee income increased 7.9% to $117 million in the fourth quarter. And for the full year, membership fee income jumped about 7% to $456.5 million. The increase in both comparative periods was mainly fueled by strength in membership acquisition, retention and higher tier memberships.
“Our terrific fourth quarter performance contributed to a record year at BJ’s, powered by all-time high membership results. Our improved assortment, investments in value and significant growth in digital sales drove our 12th consecutive quarter of traffic growth. We are also growing our footprint at pace to serve even more members,” Bob Eddy, chairman and CEO at BJ’s, said.
Some room to run
BJ’s issued guidance for fiscal 2025 that impressed investors and analysts. The company calls for a 2% to 3.5% increase in comparable store sales, excluding the impact of gas sales. It targets an adjusted EPS of $4.10 to $4.30 per share, which would be up from $4.05 in fiscal 2024.
It also targets capital expenditures at $800 million, which will be invested in its pipeline of future clubs and the construction of a new distribution center.
BJ’s got 10 price target upgrades from analysts recently, led by TD Cowan, which bumped the target up to $135 per share. That would be up 24% from the current share price.
DA Davison boosted it to $130 per share while Wells Fargo raised the target to $125 per share. Wells Fargo analyst Edward Kelly kept an overweight rating on BJ’s based on the strong Q4 and 2025 estimates that he sees as conservative, reported Tip Ranks. As BJ’s caters to discount and bulk shoppers, it is less exposed to numerous macro issues, Wells Fargo said. Further, its investments in new stores should support long-term growth.
While its P/E ratio is a bit high at 27, it has a low price-to-sales of 0.73. BJ’s has been anything but boring. And it has a lot of momentum as it heads into a macroeconomic environment that could be favorable.
