By Katherine Hamilton

BJ's Wholesale Club has a long runway to grow as customers are flocking to members-only warehouses in search of low prices and good deals, analysts say.

Investors are betting that the Marlborough, Mass., retailer of discount bulk goods can capitalize on its rising sales and lure more customers. BJ's ambitious plan to expand while trade tensions and prices mount has caught the attention of Wall Street, sending its shares up 50% over the past 12 months. Meanwhile, its rivals haven't experienced the same stock gains.

BJ's said Thursday it plans to open its first site in Texas as part of a plan to add 25 to 30 stores to its footprint over the next two years. The expansion comes as traffic at BJ's clubs grew for a seventh consecutive year and same-store sales beat Wall Street expectations in the latest quarter, growing 4%.

"Despite intense competition, management is confident that its value offer - about 25% below grocery - will resonate well with the high-growing market," said Jefferies analysts, who believe that over time, BJ's can reach more than 350 stores.

BJ's larger competitors, Costco and Sam's Club, also plan to open dozens of new clubs. But analysts say BJ's has more room to expand. The chain has 252 clubs in 21 states, compared with Costco's nearly 900 stores and Walmart-owned Sam Club's almost 600.

"This is no longer a regional concept," D.A. Davidson analyst Michael Baker said of BJ's. "If they are successful in Texas, then that really proves the point."

In its fourth quarter, BJ's general merchandise sales outpaced groceries for the first time since the pandemic, showing the chain's customers are willing to spend on higher-priced items they expect to be discounted. Shares opened 12% higher the morning after earnings were reported.

Costco's stock, on the other hand, fell 6% to $964.28 Friday morning after it reported earnings. The club's earnings per share of $4.02 missed estimates by seven cents primarily due to exchange rate headwinds, analysts said. BJ's avoided that issue because its stores are only located in the U.S., analysts said.

Costco has to contend with greater international exposure than BJ's as tariffs mount. About one-third of Costco's sales in the U.S. are imported from other countries, and less than half are items from China, Mexico and Canada, Bank of America analysts noted. BJ's said a few percentage points of its business come from China.

Costco expects to end 2025 with 916 warehouses, up from the 896 it has now. It has plans to increase the number of U.S. locations by 2% this year, and also has room for international expansion, especially in China, Jefferies analyst Corey Tarlowe said in a note.

Sam's Club said in 2023 it plans to open 30 clubs within five years.

"Any market BJ's moves into, there's already likely a Costco or a Sam's Club," Baker said. "Because of that increase in market share for wholesalers, BJ's can still move in as a player."

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

March 07, 2025 13:00 ET (18:00 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.