Ode to BJ’s Wholesale

Summary

Barron’s Streetwise Episode Summary

Episode Title: Ode to BJ’s Wholesale
Date: August 14, 2026
Host: Jack Hough
Guest: Chuck Grom (Analyst, Gordon Haskett)
Producer/Contributors: Emily Sumlin, Anthony Moriello (BJ’s Reddit group moderator)
Main Focus: A deep dive into BJ’s Wholesale Club—how it compares to competitors like Costco and Sam’s Club, what makes it unique, and whether its stock deserves a second look.

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Episode Overview

This episode explores BJ’s Wholesale Club, its business model, and what distinguishes it from rival warehouse giants like Costco and Sam’s Club. Host Jack Hough questions why BJ’s doesn’t garner the same valuation as Costco and examines recent positive changes in BJ’s operations and stock prospects with guest analyst Chuck Grom. Along the way, the team shares personal warehouse club experiences, insights from a BJ’s superfan, and the unique quirks of the retail warehouse landscape.

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Key Discussion Points & Insights

1. The BJ’s vs. Costco Narrative

• Motivation: Jack wonders why BJ’s trails so far behind Costco both in stock performance and consumer buzz, despite similar business models.
• Quick facts:
  • Stock valuation: BJ’s trades at ~20x forward earnings vs. Costco at 42x (06:00).
  • Size & reach: BJ’s has under 300 stores, mostly East Coast; Costco has over 3x more, and Sam’s Club (Walmart-owned) has more than double BJ’s stores (06:41).

2. Warehouse Club Culture & Shopper Psychology

• Personal stories:
  • NYC dwellers (Emily) often lack space for bulk goods; suburbanites have an easier time (02:18).
  • Security and ID-checking: Strict at Costco; BJ’s is more relaxed (03:09).
  • Brand identity: BJ’s is often shadowed by Costco’s cult status and famous house brand Kirkland Signature (05:20).
• House brands:
  • BJ’s: Wellesley Farms (food) & Berkley Jensen (merchandise) (06:18).
  • Notable trivia: Good Housekeeping gave Berkley Jensen Ultra Soft Bath Tissue a perfect 100 for absorbency; Consumer Reports praised Wellesley Farms ice cream (06:41).

3. BJ’s Strengths and Differentiators

• Less crowded shopping: Many BJ’s fans cite its lower customer traffic as a bonus, even if it signals less popularity (09:51).
• Car-side delivery: Unique at BJ’s—customers can have groceries brought to their vehicles, a lifesaver for pet owners or busy families (10:54).
• Acceptance of manufacturer coupons: BJ’s accepts them; Costco/Sam’s generally do not (12:27).
• Variety in SKUs (stock-keeping units):
  • BJ’s carries nearly twice the product selection (SKU count) as Costco, often offering multiple name brands per category (13:43, 20:12).
  • Smaller or more flexible pack sizes make shopping easier for mid-sized families, rather than just large or business customers (13:58).

4. Areas for Improvement and Strategic Shifts

• SKU rationalization:
  • BJ’s is working to reduce SKUs from ~7,000 towards 6,000, especially in new markets, for operational efficiency and higher margins (19:59, 22:08).
  • Chuck Grom sees this as an opportunity for BJ’s to learn from Costco’s leaner, more efficient model.
• General merchandise:
  • Currently ~15% of BJ’s sales (once 25-30%); growing this could enhance sales (22:08).
• New market expansion:
  • BJ’s is trying again to expand out of its East Coast stronghold—latest move is into Texas, where initial data shows promise (17:09, 24:33).

5. Why Not Just Copy Costco?

• Structural differences:
  • Costco’s affluence-leaning customer base, powerful Kirkland brand, west coast dominance, and cult-like following are hard to duplicate (23:18).
• Still, emulation is possible:
  • BJ’s is adopting Costco-like SKU rationalization and margin-improving strategies (23:51).
  • Effectively leveraging ‘winner-take-all’ deals with suppliers could help BJ’s negotiate better prices (24:14).

6. Investment and Stock Discussion

• Stock currently undervalued:
  • Chuck Grom upgraded BJ’s to “buy,” citing stock underperformance and improved outlook (18:36).
• Key investment theses:
  • Club membership model grants recurring revenue (“annuity stream”).
  • Low debt, active share buybacks, and strong renewal rates strengthen the financial model (27:33).
  • Room for improved stock valuation, though BJ’s isn’t expected to ever match Costco’s multiple (27:33).

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Notable Quotes & Memorable Moments

• Jack on BJ’s Shopper Identity (05:09):
  “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 $50 hot dog and soda combo.”

• On BJ’s House Brands (06:41):
  “Good Housekeeping once gave Berkley Jensen Ultra Soft Bath tissue a perfect 100 score on absorbency... 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.” – Jack Hough

• Anthony Moriello, BJ’s Reddit Moderator (09:51):
  “They often comment that BJ’s is less crowded compared to Costco, so therefore their time spent on a weekend is considerably less when shopping at BJ’s.”

• On Car-Side Delivery (10:54):
  “BJ’s offers delivery to your vehicle...that I think is the biggest difference. I’m a big fan of BJ’s delivering to your vehicle, quite frankly, because Costco doesn’t.” — Anthony Moriello

• On Product Sizing (13:58):
  “With a four pack you’ll be fine if you’re a very large family; with a mid-sized family, you’ve got to take something of a cheese forward stance for the next few weeks, let’s be honest.” — Jack Hough

• Chuck Grom on SKU Rationalization (22:08):
  “Less items tends to be better. The example I like to use is coffee makers. There’s no reason to have a dozen types... You can have two or three and give the consumer a still good choice.”

• Membership Model (27:33):
  “There’s an annuity stream because of that membership base... the warehouse club model today, because of the balance sheet, because of the membership renewal rates, are really strong.” — Chuck Grom

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Timestamps for Key Segments

• [00:50] — Episode proper begins, Jack Hough introduces the BJ’s/Costco theme
• [02:18–03:38] — Personal shopping preferences and membership stories
• [05:20–06:41] — The shadow of Costco, Kirkland vs. BJ’s brands trivia
• [09:51–11:40] — Superfan Anthony Moriello’s BJ’s insights (Reddit moderator)
• [12:27–13:58] — BJ’s strengths: manufacturer coupons, SKUs, pack sizes
• [17:09–28:12] — In-depth interview with Chuck Grom about BJ’s stock, strategy, and future
• [27:33–28:12] — Chuck explains the strengths of the warehouse club model for investors
• [28:26–28:55] — Emily’s zombie apocalypse warehouse club plan (light closing moment)

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Conclusion & Takeaways

• BJ’s is underappreciated but has unique strengths: Less crowded stores, more SKUs/brands, car-side pickup, and flexible pack sizes.
• Operational changes are showing promise: BJ’s is streamlining offerings (SKU rationalization) and succeeding in challenging new markets like Texas.
• Investment case improving: The recurring revenue club model, low debt, and strategic shifts make BJ’s an intriguing, if lesser-known, stock pick.
• But it’s not Costco: The cult status, store footprint, and Kirkland clout are hard to match — BJ’s must forge its own path, though it has room to close the valuation gap.

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Final Word (28:26):
“That's where I will be going during the zombie apocalypse and I'm shutting the door behind me.” — Emily Sumlin

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To sum up:
This episode is an affectionate, insightful ode to BJ’s Wholesale Club—warts, cheese logs, and all—delivering practical takeaways for shoppers and investors alike.

Transcript

[A]

Hi, I'm Greg Hall, PIMCO's head of global wealth management in the United States and the host of the Accrued Interest podcast. Accrued Interest is built for financial advisors and their clients. In each episode, I sit down with portfolio managers, economists and industry leaders to discuss the issues shaping markets and portfolios. As you listen to Streetwise, you'll hear excerpts from my recent conversation with Pimco Group CIO Dan Iveson on on the themes explored in our latest Secular Outlook, rupture and resilience.

[B]

And I think the warehouse club model today, because of the balance sheet, because of the membership renewal rates, are really strong inherently. It's a strong model that, you know, you do get the multiple of Costco trades north of 40 times. You know, BJ is trading half that.

[C]

Hello and welcome to the Baron Streetwise podcast. I'm Jack Howe and the voice you just heard, that's Chuck Grom. He's an analyst at Gordon Haskett and a longtime follower of BJ's warehouse club. Chuck recently upgraded the stock to buy. BJ's 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 BJ's 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.

[D]

Hi, Jack.

[C]

I'm starting to use let's get into it more as my way to get into it and you said I gotta do a slower let's get into it. Why is that again?

[D]

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 bump bumper. 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.

[C]

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?

[B]

You are?

[D]

Yes, I'm a proud Upper West Sider, so having anything in bulk is a luxury that I cannot afford. I'm buying toilet paper by the roll, practically.

[E]

You could do four rolls.

[C]

I've lived in my share of New York City apartments in the past, and, you know, they were small, but you could go from one to four.

[D]

Well, to give you context, Jack, my T shirts are currently in the entryway Hutch. If that is a clue to how

[C]

much space I have, that's a bragging point on the listing. Includes entryway, Hutch.

[D]

Entryway. Yes, but you're right. I could spring for four, but definitely not six.

[C]

Gotcha. Have you been to any of the clubs, or you've never been in one?

[D]

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.

[C]

What do they do? They check your ID or something?

[D]

Mm. 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. They take it back.

[C]

You have to show, like, a picture id.

[D]

Yeah. And then if you're not an authorized user, they will not let you do it. They're very serious people.

[C]

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.

[D]

I've never been to a BJ's, so I don't know how tight a ship they're running over there.

[C]

I should probably talk to a lawyer before proceeding. But this isn't about my potential legal troubles. This is about my preference for BJ's over Costco, to which some people listening to this will say, really? And 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 brewpubs 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 BJ's for the same reason. 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 BJ's 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 BJ's, but too 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 sliced 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 cheesing 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 BJ's 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 BJ's do better, if anything, than Costco? Why do the people who like BJ's more like it, other than the fact that it might be closer to where they live? Why can't BJ's 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 $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 BJ's get decidedly less attention. Emily, quick, what are the two main house brands at BJ's? You can't say. I don't know. You got to give me an answer.

[B]

Oh gosh.

[D]

There's like Wellesley and something or other.

[C]

That's very close. Wellesley is one and something or other is close because it's, 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.

[D]

Are BJ's just in the northeast.

[C]

Oh, you've. You've asked the right person.

[E]

I'm so glad I've prepared to tell you all about it.

[C]

We're about to do a historical flashback. Before we do, just, 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, that 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 BJ's. You see what I mean? If BJ's could just be a little more Costcoish, 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 goods seller with membership fees and no advertising and strictly capped markups. And it was called Price Club, as in sol. 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 apostrophe S. The name comes from the Yiddish Zergud or very good. And Zers 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 Zers chain was sold off and eventually shut down. The company spawned two surviving retailers. One is the closeout merchandiser TJ Maxx, part of TJX Companies. And the other is BJ's. Zers opened BJ's 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 bj, which in turn inspired the brand. Berkeley Jensen. That's enough history. There was a spin off 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.

[F]

They often comment that BJ's is less crowded compared to Costco, so therefore their time spent on a weekend is considerably less when shopping at BJ's. They're also commenting on the quality of Wellesley or Berkeley and Jensen products that are only available at BJ's 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 to better products to buy for decreased prices, that kind of thing.

[C]

Okay, BJ's is less crowded, which is another way of saying there aren't 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 BJ's 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.

[F]

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 BJ's. And knowing that I have the dog, I'll just order ahead for BJ's and they deliver to the vehicle. And it's. Honestly, I don't know why Costco doesn't do it. Because BJ's, the park as you go, all the supermarket shop, right. Acme, etc. 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, that I think is the biggest difference.

[C]

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.

[D]

Does BJ's do samples? I know Costco does. I could see that being a big gap if they don't.

[C]

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.

[E]

That's not what you're talking about. That's not as fun, right?

[D]

Not as compelling as a slice of prosciutto.

[C]

Oh, that's what they're, that's what you're getting over at Costco, right?

[D]

Oh, Costco is so tempting. You never know what you're going to get in there.

[C]

It's such a more vibrant scene. That's what we're dealing with here. BJ's is from the hardscrabble northeast, not the, not the carefree west coast. I'll tell you some things that BJ's 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 onto your whatever. Whatever. The other thing is about the SKUs, 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 it or not, BJ sells a lot more stuff than Costco sells a around twice as much. And that's because they'll carry multiple brands in the 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.

[D]

I don't.

[E]

What's another? What's another? I don't do a lot of laundry. What's.

[D]

Oh, I wonder who does do all the laundry in your house and they

[E]

make a deal with another brand, then you're out of luck.

[C]

Then you might have to go to BJ's.

[E]

You get my point.

[C]

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. 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 gonna. I'm gonna 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?

[D]

Oh, £30.

[C]

Double it. Double it.

[G]

Double.

[C]

Double that honey pail. £60. 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 baklava, it's not a hat, it's a Greek pastry.

[E]

I got off track.

[C]

Where was I? Oh, yeah, stuff that's better at BJ's. Let's see, I did the SKUs, 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 BJ's 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 BJ's 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.

[D]

Emily, you got my attention.

[C]

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.

[D]

Foreign.

[A]

Hey again, it's Greg hall from pimco. As promised, here's our cio Dan Ibison on why today's market environment may reward investors who prepare for the unexpected.

[G]

This is an environment where you need to do a lot of scenario analysis involving politics, geopolitics, changes in regulation, what may slow down all this AI momentum. There's going to be a lot more uncertainty. But for the patient investor value proposition in global high quality fixed income hasn't been this good in a long time.

[C]

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 are California listeners shrugging their shoulders. This company has not had a great record expanding out of, let's say, the i95 corridor. For most of it. It's a highway runs up and down through New York, Washington, further down south. In the past, when BJ's 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 BJ's, who is bullish. And I want to learn more from Chuck about what he likes about the stock, what BJ's is doing well, and what it can do better. Let's hear part of that conversation. Now, let me start by just asking you about the recent upgrade. What was, what prompted you to do that? Why, why is now the right time to buy BJ stock?

[B]

Well, I mean, a couple things. I mean, first it, it has languished since, you know, we downgraded it. It got to in the mid-80s. We upgraded around low 90s 95. You know, we downgraded it last summer was 1 15. So it's underperformed 1, 2 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, their entry into the state of Texas, both from an execution perspective and also from a cost cost perspective. And then, you know, we, 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 this is the perspective of covering it for so long and also covering Costco for as long as I've covered BJ's. And you know, they're very, they're very similar, but they're very different. And where they're different is really in their SKU count, product count in the store. Costco tends to run, you know, somewhere in the 37, 3800 SKUs. And BJ's tends to run, you know, close to 7,000 items in the store. You know, BJ's tends to be more like a grocery store than, than a club.

[C]

At Costco. Tell me if I'm wrong. At Costco you're going to find either Jif Peanut Butter or Skippy Peanut Butter, depending on who they, you know, strike a deal with and then maybe their store brand. But at BJ's, you're going to find all the main brands. Is that it?

[B]

That's exactly right. And in my view, I think the less SKU count is, it's operationally more efficient. And I think, you know, to your point, only having a couple offerings plus the Kirkland 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 BJ's has kind of flirted with SKU rationalization efforts several times in the past, you know, and I think they're directionally, they're lower today than they were, you know, 15 years ago. But there, I think there's still an opportunity to get from, call it 7,000 SKUs to close to 6,000 SKUs. And what we've learned is that in clubs that in their new clubs like the state of Texas and other areas, they are opening with close to 6,000 SKS. And so, so I would say a combination of the underperformance in the stock, it being out of favor, I think that the, the same store comparisons look more, more achievable and frankly beatable over the next couple of quarters. And that's sort of the opposite of where we were 12 months ago. We've done some work on looking at some of our, 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, they really did not execute very well. It was one of the main, 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, this skew rationalization effort to me looks kind of interesting just as the catalysts were changed.

[C]

Let me just point out, I think everyone will know what a SKU is, but just in case there's someone out there saying, what are these SKUs and where do I buy them? I don't even think we buy SKUs in my family. SKU SKU stands for stock keeping unit. And it's just a way of saying, like the individual number of items that a store carries.

[B]

That's right. That's correct.

[C]

Go ahead.

[B]

So less items tends to be better. I mean, the example I like to use is coffee makers. Like, there's no reason to have a dozen types of coffee makers. You can have two or three and give the consumer a still good choice. But what it also does is it, it opens up other categories. Right. If you're freeing up that space in a store, you can, you can, you can sell more items that are just different and unique. And where, where BJ's is, I think, going to look to grow their SKU 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. one point in the past it was, you know, 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.

[C]

One of the questions I was going to ask you, and you, 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 BJ's just try to be more like Costco? Is there something structural that's standing in its way or. 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?

[B]

I think they are. I mean, I think Costco's got a, you know, some structural advantages, you know, where their stores are located. And they tend to be more west coast centric.

[A]

Right.

[B]

The customer base tends to be more affluent. They have the Kirkland signature, they have the Frank that they're, they're probably more of a cult like following today than they've ever been. But there's certainly, I think there's certainly things that, that others, BJ's in particular can try to emulate, which to me, like a leaner SKU count is, is a great starting point, amongst other factors. But yeah, I think you're right.

[C]

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 Jif and you go to Skip and you 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, some of that kind of price sharpening too?

[B]

100%. Yep, that's exactly what it does. Yep.

[C]

Do, do I understand you correctly on, on the Texas move, do you see that as signaling that BJ's may be better able today than it has been in the past to expand into new markets, new states?

[B]

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 BJ's went into Florida, you have a lot of people who, you know, live in the Northeast, Massachusetts, New York, New Jersey who retired in Florida. Going to Texas is a whole different animal. And, 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. B, 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 market, but it's also got a lot of competition.

[A]

Right?

[B]

I mean, Sam's Club, Walmart in particular are very well entrenched. Costco to, to a 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.

[C]

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 and they're all, they're bragging about their Kirkland golf balls and their Kirkland jeans and their $50 hot dog and soda and all stuff. What do I, as a BJ's shopper, what can I hit him back with? What can I brag about? I know that at BJ's 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 BJ's now and makes it special where they have a niche or they, they're particularly strong versus the, the bigger players?

[B]

I'm gonna sound like I'm speaking out of both sides of my mouth here with the SKU count comment, but I do think that their deeper assortments is their advantage relative to Costco. So I just think that they are still over assorted. 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 BJ's more than Costco is. Like the smaller pack sizes, just generally speaking are something that people tend to like more.

[C]

But when you say smaller pack sizes,

[B]

I mean, I mean, I mean if I'm going to go get paper towels, do I need to get a bag of, you know, 25 of them versus cost or BJ? So you could probably get like a, like eight of them or 10 of them. Just, just the pack sizes tend to be slightly smaller.

[C]

I bought, I bought a, I bought a raisin brand there that was the size of Carry On Luggage. But I take, I take your point. I do see some smaller items too. Anything else investors should know about the case for BJ's and its stock or, you know, anything else you're seeing out there?

[B]

I think the only thing I'll, I'll say is I just think that the warehouse club model, it's membership based. So there's, 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 renewal rates are really strong. So inherently it's a strong, it's a strong model that you know, you do get the multiple of Costco trades north of 40 times. You know, BJ is trading half that now. EJ should never trade at the same multiples Costco for a variety of reasons, but that doesn't mean you could argue for, for some multiple appreciation in the stock.

[C]

Got it. Most helpful, Chuck and thanks again.

[B]

Talk to you guys soon.

[C]

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?

[D]

That's where I will be going during the zombie apocalypse and I'm shutting the door behind me.

[C]

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 holed up in stores in zombie movies, warehouse clubs, I don't know.

[D]

You should, and you should. Well, you'll have to eat the mozzarella first, but then everything else, you know, it could last you forever.

[C]

I like how you're planning in advance.

[E]

You can subscribe to the podcast on

[C]

Apple Podcasts, Spotify, wherever you listen. And if it's one of those two,

[E]

you can write a review.

[C]

By the way, I'm going to be. Should I plug my TV stuff?

[D]

Emily I think you should.

[E]

Look, folks, here comes, here comes a hard sales pitch. It's late August and you know what

[C]

happens on TV in late August.

[E]

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. 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

[C]

week and next week.

[E]

If I'm really bad this week, I might not make it next week. We'll see what happens.

[C]

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. How that's h o u g [e-mail] SummerHost thanks and we'll see you next week.

[A]

Before your episode of Streetwise wraps up. I'll leave you with one more thought from my conversation with Pimco CIO Dan Ibison.

[G]

When you look at fixed income today, high quality bonds, us or even better, a diversified global opportunity set. It's attractive. You could put together a portfolio in the liquid space with a yield of 6 to 7% without having to add a lot of really economically sensitive risk. The simple bond math is very, very favorable.

[A]

To hear my full conversation with Dan, search for Pimco's accrued interest on Apple Podcasts or Spotify. There you'll also find my conversations with our multi asset credit strategist Litvi Karui, New Edge CIO Cameron Dawson, my old friend Ted Seides from Capital Allocators and other voices shaping the market and economy today.

[C]

All investments contain risk. The discussion is for informational purposes only and not a recommendation of any investment product. Individual investors should contact their own financial professional to discuss investment options for their financial situation.