BJ's Wholesale: Mind The Gap

From “BJ’s Wholesale: A Better Business” (September 2024):

“My sense is management changed their tune a bit over time (in a good way). Maybe that is attributable to more experience in the public markets, along with positive results that provide early indication the strategy is working… With that said, there is work left to do, both in terms of the strength of their financial results (closing the comp gap with Costco U.S. and Sam’s Club), along with how they communicate to owners (start directly disclosing certain quarterly KPI’s like paid memberships)… I am not ready to make a move, but I’ve become more encouraged by recent developments at BJ’s Wholesale.”

In the period since the latest update, the results have been a mixed bag.

One issue is the lingering merchandise comp gap relative to their two largest wholesale competitors, with an average spread of ~400 basis points to Costco’s U.S. comps over the past 18 months. (Costco will report Q3 FY26 results this afternoon, which corresponds to calendar Q1 ’26 in the chart.)

As we dig into this divergence, one clear issue is business mix: non-food categories account for ~33% of Costco’s merchandise sales (excluding gasoline, pharmacy, optical, etc.), while non-grocery categories account for ~13% of BJ’s merchandise sales. The Costco treasure hunt experience in general merchandise categories has resonated with customers in a way BJ’s hasn’t yet been able to replicate; this has been a focus for years, but the gap remains. (March 2022: “We will place renewed focus on increasing the mix of general merchandise. We need a better and more relevant assortment.”)