BJ’s Price Targets Slashed to $100 on Margin Squeeze, Rising Gas Costs
BJ•Citi cut BJ’s price target to $100 from $118, and Bank of America trimmed its to $100 from $110, citing weaker merchandise margins despite a Q1 earnings beat. CEO Robert Eddy noted members spent $143 million more on gas in April, representing 3.5% of merchandise comps and straining household budgets.
1. Price Target Reductions
Citi lowered its price target on BJ’s to $100 from $118 while maintaining a Buy rating, pointing to weaker merchandise margins and lower valuation multiples in retail. Bank of America followed suit, trimming its target to $100 from $110 with a Neutral rating despite strong Q1 results.
2. Q1 Earnings and Stock Reaction
BJ’s reported a fiscal first-quarter earnings beat, but shares plunged 8.3%—the stock’s worst one-day drop in nine months—as investors focused on underlying margin and demand concerns rather than headline numbers.
3. Margin Pressure Factors
Analysts highlighted ongoing margin pressure from high shipping and supply chain costs, competitive pricing and heavy discounting. Weaker merchandise margins during the quarter have raised doubts over the potential for near-term earnings growth.
4. Rising Gas Costs Impact
CEO Robert Eddy revealed that members spent $143 million more on gas in April than a year earlier, equal to 3.5% of merchandise comparable sales. He warned that elevated pump prices are squeezing household budgets, particularly for lower-income shoppers.
