Barron's Streetwise - Ode to BJ’s Wholesale

Episode Date: August 14, 2026

Jack is tired of living in the shadow of Costco shoppers. A top Wall Street analyst makes the case for BJ’s stock. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And I think the Warehouse Club model today, because of the balance sheet, because of the membership, the renewal rates are really strong. Inherently, it's a strong model that, you know, you do get the multiple of Costco. It trades north of 40 times. You know, BJ's trading half that. Hello and welcome to the Barron Streetwise podcast. I'm Jack Howe, and the voice you just heard, that's Chuck Grom. He's an analyst at Gordon Hasket and a longtime follower of BJ's Warehouse Club.

Chuck recently upgraded the stock to B. Bye. BJs has its quarterly report coming up. The stock has done well enough over the years, but not as well as Costco. And I've always wondered, why can't BJs just be more like Costco? That's what we're going to try and figure out now. Let's get into it. Listening in is our audio producer, Emily Sumlin. Hi, Emily. Hi, Jack. I'm starting to use Let's Get Into It more as my way to get into it. And you said, I got to do a slower, let's get into it. Why is that again? Well, because, you know, we do the, like, the music goes like,

and then you go, let's get into it. And then it does the bumpa, bumpa. You would be shocked at how much of a headache it can make for me if you say it to, if it's all in one breath, if it's too fast, and then it's a choppy cut. So thank you. This is the kind of behind the scenes info that I'm imagining. The fans are just crying out for, but probably that's just my imagining. Okay.

talk to me about your warehouse club shopping preferences. Do you ever shop at a warehouse club? Are you a city kid at the moment, by the way? You are. Yes, I'm a proud Upper West Cider. So having anything in bulk is a luxury that I cannot afford. I'm buying toilet paper by the roll practically. You could do four rolls.

I've lived in my share of New York City apartments in the past, and they were small, but you could go from one to four. Well, to give you context, Jack, my t-shirts are currently in the entryway hutch, if that is a clue to how much space I have. That's a bragging point on the listing. Includes entryway hutch. Entry-way, yes. But you're right. I could spring for four, but definitely not six.

Gotcha. Have you been to any of the clubs, or do you, you've never been in one? No, I've been to a Costco back home, but I have tried to use my mother's card for her, and I was promptly escorted out of line. What do they do? They check your ID or something? If you're not the person on the card, they take you to the Costco police. And the Costco police take the chicken salad. I was asked to get it back.

You have to show like a picture ID? Yeah. And if you're not an authorized user, they will not let you do it. They're very serious people. I might be leading a life of crime because my wife has a BJ's account. And I don't know if I'm added onto it. Like she just gave me the card. and so I just go and I beep that card when I go there.

I've never been to a BJ's, so I don't know how tight a ship they're running over there. I should probably talk to a lawyer before proceeding. But this isn't about my potential legal troubles. This is about my preference for BJs over Costco, to which some people listening to this will say, really? And on others will say, what's BJ's? Because it's mostly in the east. People out west might not know.

They might think I'm talking about BJ's restaurants, which is like a chain of brew pubs. That's out of California. No, that's not the one. I'm talking about BJ's Warehouse Club, which is out of Massachusetts. And I go to BJs for the same reason that I think a lot of BJ shoppers do, or I imagine it's the reason anyhow. It's closer than my nearest Costco.

I like cheap gas and BJs has cheap gas. And if I go maybe 10 minutes further than my local gas stations, I can get to a BJ's. But it'll take me another 15 minutes beyond that to get to a Costco. So I'm cheap enough for BJs, but two lazy. for Costco. That's where I'm at philosophically and of course when I go to the store for gas, often I'm going to pop in for some merchandise. I just worked my way through a four pack of those kind of pre-slice logs of mozzarella cheese, which is, it's way too, it was way too much cheese. It was a race against time. I had to, I was cheese and everything. I had to get through it before it went

bad, but I made it. Now I noticed recently that BJ stock was about 20 times forward earnings estimates, and that compares with 42 times for Costco. And I know BJs deserves to trade at a discount, but that's a big discount. And then I noticed separately that there had been a recent upgrade of the stock on Wall Street. That got me more curious. What does BJs do better, if anything, than Costco? Why do the people who like BJs more like it other than the fact that it might be closer to where they live?

Why can't BJs just be more like Costco and earn a higher stock valuation? I had a lot of questions. I've always felt like BJ shoppers could use a support group. We live under the shadow of the Costco majority. They're always gloating about their $1.50 hot dog and soda combo. The price hasn't changed, I know, since 1985. And everybody loves the Kirkland Signature Store label. I've seen rave reviews about bacon and French vodka and extra virgin olive oil.

Kirkland often beats out top brands in high-profile reviews. and the house brands at BJs get decidedly less attention. Emily, quick, what are the two main house brands at BJs? You can't say, I don't know. You've got to give me an answer. Oh, gosh. It was like Wellesley and something or other. That's very close.

Wellesley is one. And something or other is close because it's more than one word for the other one. It's called Berkeley Jensen. Wellesley Farms is the food. Berkeley Jensen's the merchandise. Are BJs just in the northeast? Oh, you've asked the right person. I'm so glad I'm prepared to tell you all about it.

We're about to do a historical flashback. Before we do, just two quick shout-outs. I'll have you know that good housekeeping once gave Berkeley Jensen ultra-soft bath tissue a perfect 100 score on absorbency. Take a moment, collect yourself, because I got one more fact for you. consumer reports two years ago called Wellesley Farms Premium Vanilla Ice Cream, its favorite store brand in the non-premium category. It wrote, despite the word premium on the label,

this is a regular ice cream. Now, if that's not ringing praise, I don't know what is. BJ's has just under 300 members-only stores. They are mostly on the East Coast. Sam's Club, that's owned by Walmart. It has more than twice as many stores. Costco has more than three times as many. But by stock market value,

Costco is more than 30 times the size of BJs. You see what I mean? If BJs could just be a little more Costco-ish, maybe it could do wonders for the stock. Now, Emily, it would be cruel to leave you waiting any longer for a little BJ's history. So here we go. In 1976, a 60-year-old retail entrepreneur

named Saul Price turned an old San Diego airplane hangar into a bulk good seller with membership fees and no advertising and strictly capped markups. And it was called Price Club, as in Saul Price. And Price Club went on to train a merchandising executive who in 1983 launched Costco in Seattle. He broke away, he set up a competitor, but a decade later the two would merge. Meanwhile, back east, there used to be a department store chain back in the 1980s called Zayers, Z-A-Y-R-E-A-A-A-A-A-A-A-A-R-E-A-A-S. The name comes from the Yiddish Zer-Good, or Very Good, and Zerz eventually went kaput. The chain, at least, more or less like Caldor and Bradley's and some other stores you might remember from the 80s.

That happened after the rise of Walmart and Target. But before the Zer's chain was sold off and eventually shut down, the company spawned, two surviving retailers. One is the close-out merchandiser TJ Max, part of TjX companies, and the other is BJs. Zares opened BJs to see if the warehouse club trend that was doing well out west

would work in New England. It put an executive named Mervyn Weich in charge of the experiment and Mervyn had a daughter named Beverly Jean, hence the initials B.J., which in turn inspired the brain. brand, Berkeley Jensen. That's enough history.

There was a spinoff and a private equity takeover and an initial public stock offering in 2018, and here we are. So what do BJ's fans say that they like the most? I asked Anthony Moriello. He's moderator of a Reddit chat group devoted to the chain. And the main reason that he gave me wasn't exactly ringing praise. They often comment that BJ's is less. credit compared to Costco. So therefore, their time spent on a weekend is considerably less when

shopping at BJs. They're also commenting on the quality of Wellesley or Berkney and Jensen products that are only available at BJs as opposed to Kirkland. There's a groundswell of discussion of different products that are in the flyer, the mail flyer. There's always the complaining about the shopping carts. But I'd say of late, people are still talking about the economy. and better opportunities, better products to buy for decreased price, that kind of thing. Okay, BJs is less crowded, which is another way of saying there on a ton of people shopping there compared with Costco, which probably isn't super comforting if you're a shareholder. But what else? Anthony said he often shops at BJs even though it's seven minutes further than his

nearest local Costco. Okay, so what's his reason? He said it depends on whether his dog is riding shotgun. BJ's offers delivery to your vehicle shopping. Costco does not. And that's a big, big help for me because let's say on the weekend, I have the dog in the vehicle. I can't bring the dog into Costco or BJs. And knowing that I have the dog, I'll just order ahead for BJs and they deliver to the vehicle. And it's, honestly, I don't know why Costco doesn't do it because BJs, the, you know, Park as you go, all the supermarkets, shop right, Acme, et cetera. They all have that. They're always jammed.

They have four spaces, and there's always four cars. I'm a big fan of BJ's delivering to your vehicle, quite frankly, because Costco doesn't. And that, I think, is the biggest difference. Thank you, Anthony. That's good news for the pet community, I suppose. Anthony said he prefers the food court at Costco. BJ's phased out most of its food courts a decade ago. But he says the two stores have similar prices and customer service.

Does BJs do samples? I know Costco does. I could see that being a big gap if they don't. I can't remember seeing sample. I'm sure I've seen a table or two set up, but there's not really, I have had people try to flag me down and sell me a different cell phone plan. That's not what you're talking about. That's not as fun, right?

Not as compelling as a slice of prosciutto. Oh, that's what they're. That's what you're getting over at Costco, right? Oh, Costco's so tempting. You never know what you're going to get in there. It's such a more vibrant scene. That's what we're dealing with here. BJs is from the hardscrabble northeast,

not the carefree west coast. I'll tell you some things that BJs does differently. Things that I guess you could say are better, that are advantages. Number one is that they accept manufacturer coupons. Costco and Sam's do not. So that's extra savings that you can stack on to your whatever, whatever. The other thing is about the skews.

Not as in skews me, as in stock keeping units. You'll hear more about this in my conversation coming up with Chuck. It basically means item count. Believe or not, BJ sells a lot more stuff than Costco sells. Around twice as much. And that's because they'll carry multiple brands in the same. same category, whereas Costco will typically carry one plus its store brand. And as you'll hear Chuck explain, that might not be great for margins. There's room for improvement there for the

business, but customers like the variety, some customers. If you're a devoted fan of Tide, for example, and if Costco signs a deal with insert other brand name of detergent, I don't, what's another, what's another, I don't do a lot of laundry. What's, uh, oh, I wonder who. does do all the laundry in your house. And they make it deal with another brand, then you're out of luck. Then you might have to go to BJ's. You get my point. Here's another thing. Warehouse clubs all sell big sizes, but there's big and there's really, really big. BJ sells a lot of multi-packs, like my mozzarella locks. One of those on its own is fine for a family to handle. With a four-pack, you'll be fine if you're a very large family. With a mid-sized family, with a mid-sized family,

family, you got to take something of a cheese forward stance for the next few weeks, let's be honest. But at least it's four individual sealed packs. It gives you a fighting chance to get through it. I'd say the BJ sells more of these multi-packs that are a good fit for mid-sized families. Costco has more jumbo sizes for large families and Titanic sizes for businesses. Did you know that you can buy a honey pail with, Emily, I'm going to give you a, I'm going to let you guess. the size of the largest honey pail available at Costco. Give it to me in pounds. How many pounds of honey do you think that Costco sells in one pail?

Oh, 30 pounds. Double it. No. Double it. Double that honey pail. 60 pounds. Unbelievable. I know that this is for small businesses,

but what kind of business are we talking about that's getting through 60-pound honey pails? Maybe a Baklava startup, if you know what I'm saying. when I'm saying baklaba. It's not a hat. It's a Greek pastry. I got off track. Where was I? Oh yeah.

Stuff that's better at BJs. Let's see. I did the skews. I did the package sizes. And the coupons, of course. I'm sure that there are probably other things out there. One of the things Anthony told me was it says it can depend on the individual deals. There are plenty of people who will shop at both Costco and BJs and they have certain brands that they like the most.

or certain deals that they think are better. Okay, this is all well and good, but what I'd really like to know is what can get the stock moving. Chuck Grom at Gordon Haskett says the stock is a buy. I would love to believe that's true. Imagine if BJs was about to go on some epic run of improvement, or at least a pretty good run. It could close some of that stock discount.

Maybe do better things with the stores. Maybe some of those samples you're talking about, Emily. You got my attention. I want to learn more about what can be done here. And for that, we're going to hear my conversation with Chuck. That's coming up after this quick break. Welcome back. We're talking about BJ's wholesale club, ticker BJ.

Company reports earnings on the morning of August 21st. Our New England listenership is wicked interested in this subject. Our California listeners shrugging their shoulders. This company has not had a great record expanding out of, let's say, the I-95 corridor, or most of it, as a highway runs up and down through New York, Washington, further down south. In the past, when BJs has tried to push out west or down south, they've struggled. They get to places where their brand isn't terribly well known and where they lack distribution density. However, there is a new insurgency into the Dallas-Fort Worth Metroplex in

Texas, and BJ's is so far defying the skeptics, but I'm getting ahead of my conversation with Chuck Grom. He's the analyst at Gordon Haskett, who recently upgraded the stock to buy. In doing so, he became one of 12 out of 25 analysts who cover BJs who is bullish, and I want to learn more from Chuck about what he likes about the stock, what BJs is doing well, and what it can do better. Let's hear part of that conversation now. Let me start. start by just asking about the recent upgrade. What was, what prompted you to do that? Why, why is now the right time to buy BJ stock? Well, I mean, a couple things. I mean, first, it has languished since, you know, we downgraded it. It got to in the mid 80s. We upgraded it around low 90s,

95. You know, we downgraded it last summer was 1.15. So it's underperformed. One, two, just from talking to investors, I feel like it's off people's radar a little bit. And then three, you know, the setup a year ago wasn't great. Like the comparisons were really hard. They were fighting a lot of egg deflation that was coming into the channel. We also had some reservations about their entry into the state of Texas, both from an execution perspective and also from a cost perspective. And then, you know, we were in the field recently and then they hired a new merchant from from sam's club and one of the things that having i guess is the perspective of covering it for so long and also covering Costco for as long as i've covered bjs and you know they're

very they're very similar but they're very different and where they're different is really in their skew count uh product count in the store Costco tends to run you know somewhere in the 37 30800 skews and bjs tends to run you know close to 7000 items in the store and You know, BJs tends to be more like a grocery store than a club. At Costco, tell me if I'm wrong. At Costco, you're going to find either Jiff peanut butter or Skippy peanut butter, depending on who they, you know, strike a deal with and then maybe their store brand. But at BJs, you're going to find all the main brands.

Is that it? That's exactly right. And in my view, I think the less skew count is it's operationally more efficient. And I think, you know, to your point, only having a couple offerings plus the Kirkland's signature, it's just more efficient. And I think what we've learned is that BJ's, is with this new merchant, is going to go back to some things they've done in the past.

But BJs is kind of flirted with skew rationalization efforts several times in the past. And I think they're directionally, they're lower today than they were, you know, 15 years ago. But I think there's still an opportunity to get from call it 7,000 skews to close to 6,000 skews. And what we've learned is that in clubs, in their new clubs, like the state of Texas and other areas,

is they are opening with close to 6,000 skews. And so I would say a combination of the underperformance in the stock, it being out of favor, I think that the same store comparisons look more achievable and frankly beatable over the next couple of quarters. And that's sort of the opposite of where we were a whole months ago. We've done some work on looking at some of our data sets on the state of Texas and have gotten more comfortable that they are, in fact, opening up well down there. When I covered the stock 15 years ago, they began to open up in

certain states that were not their core market in the Northeast, and they really did not execute very well. It was one of the main reasons why it actually wound up going private to Leonard Green at one point years back. So we got comfortable with Texas. And then, you know, this skew rationalization effort to me looks kind of interesting, just as a cattle's were changed. Let me just point out, I think everyone will know what a skew is, but just in case, someone out there saying, what are these skews and where do I buy them? I don't even think we buy skews in my family. Skew stands for stockkeeping unit. And it's just a way of saying like the individual number of items that a store carries. That's right. That's correct. Go ahead.

So less items tends to be better. I mean, the example I use is like coffee makers. Like there's no reason to have a dozen types of coffee maker. You can have two or three and give the consumer a still a good choice. But what it also does is it opens up other categories, right? If you're freeing up that space in a store, you can, you can sell more items that are just different and unique. And where BJs is, I think, going to look to grow their skew count where it doesn't have it today is in the general merchandise part of their business, which is currently about about 15% of sales. At one point in the past, it was close to 25 to 30%. So there's an opportunity to grow it more. And then that tends to be, you know, basket enhancing as well.

One of the questions I was going to ask you, and you may be in the process of answering it, is if we have this model in Costco that has been so wildly successful over the years, why can't BJs just try to be more like Costco? Is there something structural that's standing in its way? I know it must be differentiated in some ways, but why can't it try to just copy some of the successful things that Costco has done? it sounds like it might be moving in that direction or is that an overstatement? I think they are. I mean, I think, you know, some structural advantages, you know, where their storage are located. They tend to be more West Coast-centric, right? The customer base tends to be more affluent.

They have the Kirkland signature. They have the rank that they're probably more of a cult-like following day than they've ever been. But there's certainly, I think there's certainly things that that others, BJs in particular, can try to emulate, which to me, like, Like a leaner skew count is a great starting point amongst other factors. But yeah, I think you're right. As I understand it, one of the things Costco is able to do, if we go back to the peanut butter example is that, you know, you go to, you go to Jiff and you go to skipping and say, all right,

who wants this business? And I would imagine that they're going to come in pretty aggressively on price to try to win that spot as the sole brand of peanut butter on the shelf at Costco. And so if BJ's goes in that direction, you think they can benefit from some of that kind of a price sharpening too? 100%. Yep, that's exactly what it does. Do I understand you correctly on the Texas move?

Do you see that as signaling that BJs may be better able today than it has been in the past to expand into new markets, new states? That's right. So, I mean, they've, in the past five or six years, they've moved into Michigan, Tennessee. But you think about just going into a state like Texas where, when BJs went into Florida, you have a lot of people who live in the Northeast, Massachusetts, New York, New Jersey, who retired in Florida. Going to Texas is a whole different animal.

And so we were concerned about it, not because we didn't think they could do it, but it was just it had execution risk. And based on our traffic data and based on what they've disclosed in terms of members per club, it looks like they're off to a very good start, which A alleviates risk in the near term about just Texas in general. The pre-opening costs in the out years is going to likely be lower because this first initial ramp is pretty expensive. And then C, it portends the opportunity to open up more stores.

And obviously, Texas is huge. So there's a big, big market. But it's also got a lot of competition, right? I mean, Sam's Club, Walmart in particular, are very well-enrenched Costco to slightly lesser degree. So it's just something we felt like a year ago we flagged. And based on what we've been able to tell, is they're doing pretty well there out of the gate. Help me out here with, you know, I live closer to a BJ's than I do to a Costco or a Sam's.

So, and it's close enough where if I'm going to go to a warehouse store, I'm going to go to BJ's. So I'm a BJ shopper, I guess. And I hear from the Costco people in their old, they're bragging about their Kirkland golf balls and their Kirkland jeans and their $1.50 hot dog and soda and all this stuff. What do I, as a BJ's shopper, what can I hit them back with? What can I brag about? I know that at BJs, they will take manufacturers' coupons while they don't take those at some of the other stores. Is there anything else out there that differentiates BJs now

and makes it special where they have a niche or they're particularly strong versus the bigger players? I'm going to sound like I'm speaking out of both sides of my mouth here with the skew count. Amen, but I do think that they're deeper assortments. is their advantage relative to Costco. So I just think that they are still oversorted. I think there's a way for them to get leaner. But I do think that that's something that people tend to like about BJs more than Costco

is like the smaller pack sizes, just generally speaking, are something that people tend to like more. But when you say smaller pack sizes, I mean... I mean, if I'm going to go get paper towels, do I need to get a bag of an assort, you know, 25 of them versus BJs. You could probably get like eight of them or 10 of them. Just the fact sizes tend to be slightly smaller. I bought a raisin brand there that was the size of carry-on luggage. But I take your point.

I do see some smaller items too. Anything else investors should know about the case for BJs and its stock or, you know, anything else you're seeing out there? I think the only thing I'll say is I just think that the warehouse club model, it's membership based. So there's an annuity stream because of that membership base. You know, they don't have a lot of debt on their balance sheet. They've been buying back stock.

So you think about different retail models. And I think the Warehouse Club model today, because of the balance sheet, because of the membership, the renewal rates are really strong. So inherently, it's a strong model that, you know, you do get the multiple of Costco trades north of 40 times. You know, BJ's trading half that. Now, EJ should never trade at the same multiple as Costco for a variety of reasons. doesn't mean you could argue for some multiple appreciation in the stock.

Got it. Most helpful, Chuck. Thanks again. Talk to good soon. Thank you, Chuck and Anthony. And thanks to all of you for listening. Emily Sumlin is our producer. Emily, any last thoughts on the warehouse clubs?

That's where I will be going during the zombie apocalypse. And I'm shutting the door behind me. I feel like I've seen. I won't say every zombie movie, but most zombie movies. I know I've talked about this in the past. There's basically two genres, fast and slow, depending on how the zombies move. I've seen people hold up in stores, in zombie movies. Warehouse clubs? I don't know.

You should. Well, you'll have to eat the mozzarella first, but then everything else, you know. It could last you forever. I like how you're planning in advance. You can subscribe to the podcast and Apple Podcast, Spotify, wherever you listen. And if it's one of those two, you can write a review. By the way, I'm going to be, should I plug my, TV stuff, Emily? I think you should. Look, folks, here comes

a hard sales pitch. It's late August. And you know what happens on TV in late August? All the good people go on vacation. And what you do is you look around at who's left and you say, hey, we've got to stick someone in front of this show to keep this thing running for the two weeks until the people we like come back. To the people we like come back. And that's where I come in.

I'll be hosting the Barron's Roundtable show on Fox Business for I think this week and next week. If I'm really bad this week, I might not make it next week. We'll see what happens. Anyhow, you can watch that. I think it airs a bunch of times over the weekend on Fox Business. Oh, and if you have questions, not for the TV show, but if you have questions for the podcast,

and if they're on the subject of high finance or low finance, send them in. They could be in a future episode. You just tape them on your phone, use the voice memo app, and you email it to jack. That's h-o-u-g-h. at barons.com slash summer host. Thanks and we'll see you next week.