For Conservative Investors:
BJ's Wholesale Club |  - Co. Spotlights available via RSS feed
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There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks. | | BJ | $34 | Best Features: Solid growth with more expected; low debt.
Watch Out For: Competitors like Costco moving into urban areas. | 52-wk range | $27-$40 | | Beta | 0.45 | | Dividend Yield | 0% | | Market Cap. | $1.89B |
February 9, 2010 - BJ's Wholesale Club, Inc. (BJ-NYSE) operates warehouse clubs in the eastern United States. The company offers food products, such as frozen foods, fresh meat and dairy items, beverages, dry grocery goods, fresh produce and flowers, canned goods, and household paper products; general merchandise, including consumer electronics, prerecorded media, small appliances, tires, jewelry, health and beauty aids, household needs, chemicals, computer software, books, greeting cards, apparel, furniture, toys, and seasonal items.
It also offers specialty services, including the operation of optical centers, food courts, garden and storage sheds, patios and sunrooms, and wireless centers; home improvement, BJ's Vacations, installation of home security systems, propane tank filling, automobile buying, car rental, television and home theater installation, and muffler and brake services, as well as electronics and jewelry protection plans.
In addition, the company, through its Web site, bjs.com, provides electronics, computers, office equipment, products for the home, health and beauty aids, sporting goods, outdoor living, baby products, toys, and jewelry; various services, including auto and home insurance, home improvement, travel services, and membership services.
As of January 31, 2009, it operated 180 warehouse clubs in 15 states, as well as 102 gasoline stations in its clubs. The company was founded in 1996 and is based in Natick, Mass.
There's a lot to like here. If you look at a price chart for BJ, you see almost a flat line between 2004 and 2010, with a slight rise, then fall in price in 2008. Boring, right? Well, if you remember how most stock charts look for those years (almost all down, dramatically), this one could get your heart racing, especially if you owned one of those deflating stocks. To have a stock that acts like the Rock of Gibraltar in tumultous times can bring great comfort. BJ's did that for investors over the last 6 years, and now it seems ready to reward them with a higher stock price.
Earnings for all of 2009 should come in at $2.50 according to the 20 analysts following the stock. Next year, they have a consensus of $2.71. The earnings call will be on March 3. For the last quarter of 2009, the estimate is for 96 cents a share, up from 89 cents in 2008. For the full year, earninigs should advance 12%. Not bad in an economy that shrunk and hit most businesses with negative results.
BJ's is the go-to store for cash strapped consumers anxious to find the best bargains for their bucks. BJ's wholesale pricing attracted new customers in 2009, especially those buying groceries. Prices are lower here than competing food stores. Another plus for BJ's: it accepts all major credit cards and food stamps, something not all wholesale stores do.
Revenues for the year should finish at $10.17 billion, up 1.4% from the $10.03 billion reported in 2008. Next year analysts see $10.84 billion, a 6.6% improvement in total sales. New membership fees help the top and bottom lines, and new members keep coming. Once they've signed up and saved on every day items, most of them will no doubt continue to shop at BJ's no matter what the economy does. Furthermore, non-grocery items have recently been strong performers, ones like apparel, software, and video games. Another item selling well: gas. Many customers simply fill up after shopping for prices that are usually below the competition.
Competition is eyeing BJ's success and making moves, paricularly Costco (which only takes American Express's credit card) which announced it will be entering into more urban markets. BJ's will add between 5% and 6% of current square footage over the next 5 years in existing areas.
A couple of numbers stand out for this quality company: Debt is only 1% of capital. The P/E ratio is 13, well below the usual 16 to 19 over the last 5 years. Analysts see annual earnings growth to average 9.65% over the next 5 years, compared to 8.6% in the last 5 years. Beta is only .45, reflecting the stable price in a volatile market.
More numbers: Price to sales is .19. Price to book is 1.83 with Book value at $18.59. Operating margin for the last 12 months was 2.18% while the Profit margin was 1.30%. Return on Equity was 12.82%. Total cash in the bank is $55.07 million for 99 cents a share. Total debt is $1.29 million. Current ratio is 1.17. There are 55.68 million shares outstanding with a float of 54.92 million. Institutions own 95% of the float.
Conservative investors should find comfort here. The balance sheet is unlevered, valuations are relatively low, and prospects for growth appear good. But competition watched BJ's success and is ready to move into its markets. Still analysts see the company doing well for some time to come, even with new competition on the block. And it's still only in the eastern U.S.
- Company Web site: www.bjsinvestor.com - Ted Allrich |
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