Why BJ Wholesale Stocks Dropped Today

Shares BJ Wholesale Club (BJ -6.52%) fell today in response to reports of disappointing financial results for the warehouse club chain in the second quarter.

While the company beat estimates for the last quarter, forecasts had called for full-year earnings per share (EPS) to be at the low end of those estimates.

As a result, as of 12:46 p.m. ET, shares were down 6.5%.

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BJ exceeds expectations

A chain of warehouse clubs that competes with Sam’s Club and Costco Wholesalereported solid results in the second quarter of its fiscal year ended August 3, with comparable sales, excluding gasoline, up 2.4% and membership income up 9.1% to $113.1 million.

As a result, revenue rose 4.9% to $5.21 billion, beating expectations of $5.15 billion. Margins were mostly stable, and at the end of the day, adjusted earnings per share rose 10% to $1.09, beating expectations of $1.

CEO Bob Eddy said, “Our second quarter was characterized by solid membership, acceleration in traffic and unit growth, and rapid growth in our digital business, which led to strong results in the quarter.”

The counseling was unsatisfactory

The BOJ is forecasting like-for-like sales, excluding petrol, to rise 1% to 2% year-on-year, driven by growth in traffic and outlets, as well as strong sales of perishables.

The company also said it was targeting adjusted earnings per share of $3.75 to $4, though it expects long-term investments to push EPS toward the lower end of that range. That compares with analysts’ consensus of $3.93.

While these forecasts are a bit of a disappointment, BJ’s is holding up well against larger rivals like Costco and Sam’s Club, and the stock still looks poised to generate steady growth.