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BJ's Wholesale Club (BJ +1%) is trading higher today after Goldman upgraded the stock to Buy from Neutral. But even before this upgrade, shares for this warehouse club operator have been noticeably strong since early February, when it was trading around $65. The stock is now above $76.

• With some good things going on at the company, Briefing.com wanted to provide a quick update on BJ's Wholesale Club ahead of its Q1 (Apr) earnings report next month. On March 7, BJ reported Q4 (Jan) earnings that were better than expected with its highest yr/yr revenue growth of the year. Comps (ex-fuel) increased by +0.5% in Q4, which was at the high end of guidance. This was an improvement from Q3's flat comp. It was also encouraging to see BJ guide to +1-2% comps (ex-fuel) for FY24. BJ has also been improving its digital capabilities for shoppers. Digitally-enabled comps jumped +28.0% in Q4.
• A big driver of comps was robust traffic in Q4. BJ said that traffic was positive all year, but accelerated even further in Q4, contributing about 3 percentage points to comps. Importantly, BJ said it turned the corner on unit volumes in Q4 with positive comp units led by its consumables business. As a result, BJ continued to gain market share in Q4, as it has all year. Its perishables, grocery and sundries divisions delivered comp growth of nearly 1% in Q4, driven entirely by volume growth, unlike the rest of the market which continues to face unit declines.
• Another aspect to the story is that the company is broadening its geographic reach. BJ has historically been Northeast-focused, but has been expanding into new markets. It recently announced five new clubs in the Southeast and Midwest, including new markets in Knoxville and Myrtle Beach. It also now has a large presence in Florida. BJ says its real estate pipeline is the strongest it has been in 20 years.

Overall, there are some good things going on with BJ's Wholesale Club. Traffic has really been picking up, which makes sense given BJ's high exposure to groceries and somewhat lower exposure to discretionary categories. Comps are also heading in the right direction as members become more resourceful on tighter budgets. BJ is attractive for its value offerings and that is showing up in the higher traffic numbers.

We think what is helping is that BJ is a retailer that has positioned itself between warehouse clubs and grocery stores. It combines the bulk savings of a warehouse club but offers a broader assortment of perishable and grocery products. With groceries in high demand these days, BJ's wider selection is helping to draw in customers. Consumers are spending less on discretionary items and more on groceries, which is helping BJ. Costco and Sam's Club remain the giants in the warehouse club space, but BJ seems to be carving out a nice space for itself.