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BJ's Wholesale Club (BJ) is trading modestly higher today after disclosing last night that a director bought 2,455 shares at $81.26 worth ~$199K. In fairness, this does follow some sales by its CEO in early September. However, while not a huge purchase, we see it as a sign that this person sees some value here because the stock has pulled back following its Q2 (Jul) report last month.

• This warehouse club chain beat on EPS in Q2, its largest EPS upside in five quarters. Revenue rose 4.9% yr/yr to $5.21 bln, which also was better than expected. It also reaffirmed full year EPS at $3.75-4.00. However, with its investments for the long term, BJ says this could possibly drive EPS toward the low end of that range.
• Basically, it sounds like BJ is going to sacrifice some near term earnings potential in order to invest for the future. Specifically, BJ says its real estate pipeline is growing faster than it has in years. These investments are heavy today, but in the years ahead, the company believes it will be thrilled that it made them. Just last week, BJ announced a new store opening in Palm Coast, Florida.
• The company is at the start of a stretch that will see it open 11 new clubs in just the next six months. That's a lot in a short period of time relative to its 244 locations right now. BJ made a good point on its Q2 call: The new clubs that it has opened since its IPO have delivered comp sales growth of more than 3x the chain average for the second quarter.
• In terms of the health of the consumer, BJ says its members remain focused on value. Spend per shopper remains very healthy at higher income levels and continues to improve at the lower end, especially as it has moved past the tougher laps related to government aid in Q2. Critically, in Q2, BJ drove greater trip frequency and overall spend growth across high-, mid-, and low income levels, which demonstrates that its value position in is resonating across income segments.
• Also, BJ has smartly positioned itself as sort of a hybrid 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 than its club competitors. With groceries in high demand these days with more people eating at home and with consumers focusing more on necessities and less on discretionary items, that is good for BJ.

Overall, we understand why investors are often not too excited when a company plans to spend a lot of money in the short term in order to grow over the long term. That eats into margins and EPS. However, management sounds pretty confident that it will look back in the years ahead and be "thrilled" it spent the money now on new locations. With the stock having pulled back 12% from its July highs, at least this one director sees some value here.