BJ's Wholesale Club To Generate 'Solid' Top-Line Growth, Says Bullish Analyst

BJ's Wholesale Club Holdings Inc BJ shares were in focus last week after one of its deli meat vendors was forced to file for bankruptcy.

The company’s grocery business is poised to benefit from a return of volume growth, while the inflation outlook “also appears supportive,” according to Goldman Sachs.

The BJ's Wholesale Club Analyst: Kate McShane upgraded the rating for BJ's Wholesale Club from Neutral to Buy, while raising the price target from $81 to $87.

The BJ's Wholesale Club Thesis: The grocery business, which accounted for 86% of the company’s merchandise sales in fiscal 2023, could see volume growth over the coming year, McShane said in the upgrade note.

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BJ's Wholesale Club could gain market share in the long term, due to the grocery industry being fragmented, she added.

“Additionally, BJ’s FY24 guidance assumes minimal deflation in 1Q and slight inflation for the balance of the year, which we view as achievable as we see stability building for food-at-home inflation based on the GS Food COGS Index,” the analyst wrote.

BJ's Wholesale Club could also benefit from increased customer engagement in general merchandise categories, “amid an improving consumer backdrop and the company’s assortment refresh,” McShane further stated. “Market share gains and improving industry trends should drive solid top-line growth,” she added.

BJ Price Action: Shares of BJ's Wholesale Club rose by 0.71% to $76.45 at the time of publication on Monday.

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