Better Buy Now: Walmart vs. BJ’s Wholesale

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As the prices of everyday goods rise, more and more consumers are looking for ways to cut down on their spending. Although discount retailers struggle with changing consumer tastes and persistent supply chain issues, these businesses are well-positioned to benefit from the current economic climate — if they remain resilient and competitive.

Let’s compare two different cost-saving retailers and determine which consumer staple stock is the better buy in today’s market.

In the case of Walmart

Walmart (WMT -0.33%) The stock has risen 22% in the past six months, now trading within reach of an all-time high reached in April 2022. Shareholders and potential investors want to know: Can Walmart stock push past current price levels and set new highs?

The retail chain posted revenue growth across all segments in Q3, beating both analysts’ and the company’s own expectations. Total sales for the third quarter topped $150 billion, and Walmart raised its full-year guidance for consolidated sales growth by 1%. Most notably, Walmart’s e-commerce business grew 46% in Q3 compared to the same period last year.

Despite expected sales growth, the current economic climate continues to challenge the retail behemoth. Inflation, geopolitical unrest, and supply chain disruptions all weighed on Walmart’s profitability, especially in Q3 with unfavorable currency exchange rates. As a result, Walmart posted a net loss of $1.8 billion for the quarter.

On the bright side, Walmart continues to churn through its excess inventory, which has been a big drag on net profit margins over the past year. CEO Doug McMillan claimed Walmart would be “thoughtful and balanced about inventory levels” to avoid a similar inventory glut.

Walmart has converted a new wave of high-income shoppers acquired during the pandemic. Q3 marked an increase in the frequency of these consumers, and CFO John David Rainey believes Walmart is positioned to capture more high-income shoppers as cost-saving trends prevail.

The case for BJ’s Wholesale Club

BJ’s Wholesale Club (BJ -0.32%) The stock has advanced more than 30% from its May 2022 low, but still trades 16% shy of its all-time high since last November. With consumer staples stocks showing resilience despite a slowing economy, investors are wondering if now is the time to buy BJ’s dip.

Compared to Walmart’s net loss in the third quarter, BJ’s delivered its most profitable third quarter ever. Member fee revenue for the quarter reached nearly $100 million, while same-store sales rose 9.7% year over year. Gasoline sales accounted for nearly half of BJ’s Q3 sales growth, and CEO Bob Eddy described 2022 as “the most profitable gasoline year we’ve ever seen.”

At a similar rate to Walmart, BJ’s online segment has seen a significant growth of 43% year-on-year. Its digital product offerings have nearly tripled in the past three years, with a curbside delivery option helping to accelerate expansion. During Q3’s earnings call, Eddie boasted about his ability to grow digital sales from nearly zero to $1 billion in just four years.

Excluding gas sales, BJ’s gross profit margin fell 30 basis points last quarter. Unrelenting supply chain disruptions and the rising cost of products like milk, cheese and chicken soak up the main culprits, and BJ’s management team scrambles to keep prices competitive yet still profitable. Already seeing some relief in raw material costs, BJ’s Wholesale Club focuses on saving its customers money.

Which stocks are better to buy right now?

To help determine which of these budget-friendly retail stocks are the better buys in today’s market, let’s compare their price-to-book ratios and one-year growth estimates.

Metric Walmart BJ’s Wholesale Club
market capitalization $395.8 billion $9.25 billion
Price to book ratio 5.5 9.8
One year growth estimate 7.6% 1.1%

Source information: Yahoo! financing.

With a low price-to-book ratio and a good near-term growth forecast, Walmart stock represents a good buy right now — at least, based on those two measures. But if BJ’s Wholesale Club continues to break records, keep an eye on its stock to reflect the company’s progress. In an economy where saving money is a priority, this value-proposition benefits retailers both.

Micah Angel has no position in any of the stocks mentioned. The Motley Fool has positions at and recommends Walmart. Motley Fool has a revealing policy.


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