This 'Money Saver' for Grocery and Gas Could Be a Moneymaker for Shrewd Investors
During a time of sky-high inflation, interest rate hikes, and looming fears of a recession, there's still one thing you can count on — the resiliency of the American people.
They aren't taking a “wait and see” approach to find out if the Fed can get inflation under control for the simple reason that they can't afford to wait.
In August, grocery prices rose at their fastest pace since 1979, household furnishing prices climbed, and even though we saw slight relief from inflated prices at the pumps, we're still just one hurricane or major issue away from prices skyrocketing back up.
Folks are now taking matters into their own hands — turning to membership-only warehouse clubs to make their hard-earned dollars stretch further.
A survey by Consumers' Checkbook previously found that a family spending $150 a week at a conventional supermarket could save up to $2,000 or more a year by shopping at a membership-only warehouse club.
These clubs sell home goods, electronics, and much more at steep discounts. Many also offer gas perks. It's almost a no-brainer to become a member.
Today, I'm going to share a company that's cashing in on the membership-only warehouse club model. Its stock has been in an uptrend since Sept. 19, according to TradeSmith's Smart Moving Average.
And that's a good sign from our algorithms that the stock price is beginning a sustainable move higher…
The last time this happened was in February 2020 – a week before stocks crashed 30% into the fastest bear market in history.
And it's your signal that history may be about to repeat itself... And cause a wave of devastation for some of the world's most beloved stocks. The financial lives of hundreds of thousands hang in the balance.
And the decisions you make in the coming days could determine your wealth for the next decade.
The Industry Thriving in the Face of Economy-Killing Inflation
When talking about membership-only warehouse clubs, three brands normally come to mind:
BJ's Wholesale Club Holdings Inc. (BJ)
Costco Wholesale Corp. (COST)
Sam's Club (owned by Walmart Inc. (WMT))
But of these “big three” discounters, one has displayed superior stock price performance overall.
The chart below reveals how BJ dominated its two chief rivals after all three experienced a pullback through April and May.
Source: Google Finance
BJ's operates 230 retail “wholesale clubs” and 160 branded gas stations.
In addition to everything you need to make a home-cooked meal, you can also find baby formula, patio furniture, TVs, seasonal decorations, and pretty much anything else you can think of at BJ's — all within one shopping trip.
The company has service departments that include:
BJ's Tire Center for members-only deals on tires.
BJ's Optical for eye exams.
BJ's Travel for members-only discounts on vacation packages, hotels, and rental cars.
Club members also benefit from discounted items through several other companies that BJ's has partnered with.
A BOPIS (buy-online-pickup-in-store) option adds even more convenience for its members and helped fuel a 47% year-over-year (YoY) increase in digital sales in the second quarter of the year.
BJ's gas stations are thriving, too, selling 18% more gallons of gas in Q2 than in the previous year.
And the company plans to eventually sell gas at 75% of its locations.
During a time when people are scrutinizing what memberships they are paying for — like streaming music and video services — it's clear that most consider their BJ's Wholesale Club memberships too important to cut.
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Take a look at these highlights from the company's latest earnings report for further proof that business is booming for BJ's:
Total comparable club sales increased 19.8% YoY.
Free cash flow reached $300.4 million.
Income from membership fees came in at $98.8 million for an 11.3% YoY increase.
And gross profit increased from $763.5 million the previous year to $866 million.
To round it all out, our TradeSmith tools confirm the company is firing on all cylinders.
BJ is in our Green Zone and the stock has been in an uptrend since Sept. 19, signaling that the price is at the start of a sustainable move higher.
Good investing,
Mike Burnick Senior Analyst, TradeSmith
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TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results.
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