Costco vs. BJ's Wholesale: Which Membership Retailer Looks Promising?

Globe and Mail

4 days ago

Costco Wholesale Corporation COST and BJ's Wholesale Club Holdings, Inc. BJ are two prominent players in the membership-based retail warehouse sector. Costco, with a market capitalization of approximately $444.3 billion, has built a global presence and is known for its pricing power, operational efficiency and loyal customer base. The company manages a network of 905 warehouses globally, including 624 in the United States.
In comparison, BJ's Wholesale holds a market capitalization of around $15.1 billion and operates about 255 clubs and 190 BJ's Gas locations. While smaller in scale, BJ's has been expanding its footprint and refining its value proposition through localized assortments, private label offerings and growing digital capabilities.
Amid shifting consumer preferences and a focus on value-driven retail, comparing these two membership warehouse giants helps gauge which is better positioned for sustained growth.
The Case for Costco
Costco's resilient business model, built around its membership-based structure, remains a major growth driver. High membership renewal rates — 92.7% in the United States and Canada and 90.2% globally — combined with efficient supply-chain operations and bulk purchasing power, allow Costco to offer competitive pricing. This robust model has enabled Costco to thrive, even during economic downturns.
Members pay an annual fee for access to Costco's warehouses, where they enjoy significant discounts on a wide range of products. This structure not only ensures a reliable revenue stream but also fosters a sense of value and exclusivity. In the third quarter of fiscal 2025, membership fee income rose 10.4% year over year, aided by a recent fee hike, which added approximately 4.6% growth in the quarter. The company ended the quarter with 79.6 million paid household members, marking a 6.8% increase year over year.
Costco continuously adapts to market trends and consumer preferences. The company regularly updates its product offerings to include a mix of everyday essentials and unique, high-demand items. Through market analysis and tailored offerings, Costco has expanded its presence, both domestically and internationally. For fiscal 2025, the company expects 27 total openings (24 net new), bringing its global warehouse count to 914.
Digitization also plays a key role in Costco's expansion. E-commerce comparable sales rose 14.8% in the third quarter, reflecting growing online demand. Costco Logistics saw a 31% increase in items delivered, driven by the success of big-ticket product categories. The recent launch of a Buy Now, Pay Later program in partnership with Affirm is another step toward enhancing convenience and flexibility for members. For the four weeks ended June 1, 2025, e-commerce comparable sales jumped 11.6%.
That said, challenges do linger. Currency headwinds and potential tariffs on key imports could pressure margins. Meanwhile, consumer spending is shifting toward essentials, with discretionary spending seeing weaker demand.
The Case for BJ's Wholesale Club
BJ's Wholesale Club's commitment to bolstering marketing and merchandising capabilities, coupled with its foray into high-demand categories and expansion of its own-brand portfolio, has yielded results. The company has been steadily increasing its footprint, targeting high-growth regions and underserved markets. This approach ensures maximum return on investment and helps BJ's tap into new customer bases.
The company's core strength is its robust membership base, a key pillar of its business model. In the first quarter of fiscal 2025, BJ's achieved an 8.1% increase in membership fee income, reaching $120.4 million. The company maintains an impressive 90% tenured renewal rate, with high-tier membership penetration surpassing 40%. BJ also benefited from a membership fee increase effective January 2025.
BJ's Wholesale Club's focus on expanding digital capabilities is another key aspect of its growth trajectory. Offering members convenient options such as same-day delivery, curbside pick-up, and buy online and pick up in-club, the company ensures an engaging and seamless digital shopping experience. Digitally enabled comparable sales climbed 35% in the first quarter, supported by investments in technologies like AI-assisted pick-route optimization.
Real estate expansion further supports BJ's growth strategy, as the company opened five new clubs and four new gas stations in the first quarter and remains on track to add 25-30 clubs over the next two years. The company's Fresh 2.0 initiative, initially launched in produce, has yielded high-single to low-double-digit comps and has now been extended to meat and seafood. These initiatives are not only driving frequency and basket size but also increasing member engagement and retention.
However, BJ's Wholesale does face some headwinds. While BJ's had a strong first quarter, its outlook for the full year looks a bit conservative. The company expects comparable club sales (excluding gas) to grow only 2% to 3.5% for the year, with the first quarter likely being the strongest. This suggests that growth may slow in the second half due to tougher comparisons and changing economic dynamics. Rising costs from labor, occupancy and depreciation — driven by new store openings — are contributing to SG&A deleverage. Tariff-related volatility adds another layer of complexity, while a decline in general merchandise comps highlights ongoing softness in discretionary spending.
COST vs. BJ: How Do Estimates Stack Up?
The Zacks Consensus Estimate for Costco's current fiscal year sales and EPS implies year-over-year growth of 8.1% and 12%, respectively. The consensus estimate for EPS for the current fiscal year has risen by 8 cents to $18.04 over the past 30 days. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
The Zacks Consensus Estimate for BJ's Wholesale's current fiscal year sales and EPS suggests year-over-year growth of 5.5% and 6.2%, respectively. The consensus estimate for EPS for the current fiscal year has increased by 3 cents to $4.30 over the past 30 days.
COST vs. BJ: A Look at Past Three-Month Stock Performance
Shares of Costco have advanced 7.7% over the past three months. BJ's Wholesale shares have risen 3.2% during the same period.
COST vs. BJ: A Peek Into Stock Valuation
Costco is trading at a forward 12-month price-to-earnings (P/E) ratio of 51.19, higher than its one-year median of 50.79. Meanwhile, BJ's Wholesale's forward P/E ratio stands at 25.62, above its median of 22.83.
COST vs. BJ: Which Stock Looks More Promising Now?
When compared with BJ's Wholesale Club, Costco appears to be the more compelling choice in the membership-based retail space. Its global scale, unmatched customer loyalty, proven pricing power and consistent performance through economic cycles provide a solid foundation for continued growth. Meanwhile, BJ's is showing meaningful progress through expansion, digital innovation and private label growth, making it a promising contender in its own right. However, given Costco's proven track record and broader market presence, it holds a stronger position for investors seeking stability and long-term growth potential. Both COST & BJ stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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BJ's Wholesale Club Holdings, Inc. (BJ): Free Stock Analysis Report
Costco Wholesale Corporation (COST): Free Stock Analysis Report