BJ's Wholesale, a Costco and Sam's competitor, will open clubs in the Southeast

Smaller competitor to Costco and Walmart-owned Sam's Club is just the latest warehouse club to share its expansion goals. Sam's Club said in early 2023 that it would open more than 30 stores in the United States over five years. Earlier this month, Costco said on an earnings call that it expects to open 30 new clubs globally in its financial year, including two transfers. 22 of them are scheduled to be implemented in the United States

Their movements come as Value-focused retailers, such as off-price chains, are driving store growth in the United States. The retailers that have announced the most new locations so far this calendar year are Dollar General, Burlington and Aldi, according to Coresight Research, a retail consulting firm that tracks openings and closings.

Likewise, club stores resonate with budget shoppers because they emphasize getting more for less.

BJ's has a smaller reach than its club competitors. Most of the retail clubs in Marlborough, Massachusetts were concentrated on the East Coast. Its expansion will bring it to 21 states compared to Costco, which had clubs in 46 states, Washington, D.C., and Puerto Rico as of Sept. 3, the end of its fiscal year. Sam's Club has locations in 44 states and Puerto Rico.

However, BJ's has been in growth mode since 2016, when it ramped up its efforts to break into new markets, said Bill Werner, executive vice president of strategy and development for the retailer. It has opened 27 new clubs and entered four new states over the past five years: Tennessee, Alabama, Indiana and Michigan. Seven new clubs were opened in the last financial year.

Werner said she plans to open 10 to 12 clubs each year in the future.

However, BJ's will have to convince customers to purchase memberships, which can be a challenge if the second or third club is in the customer's backyard.

BJ's could stand out through its focus on grocery, said Greg Mellish, a retail analyst at Evercore ISI. It contains nearly twice as many items as competing clubs, including many refrigerator staples like fruits, vegetables, and deli meats. Besides carrying large quantities of laundry detergent and paper towels, they also sell smaller items like a gallon of milk or a single loaf of bread that fits the weekly grocery store.

“You might be able to buy a piece of cheese for no more than two pounds,” Melish said.

BJ's is better off focusing on stealing sales from regional and national supermarkets like Publix and Kroger, he said.

“It would be a mistake for BJ's to try to be a Costco,” he said. “That's not the point. The point is that there are a lot of people in a lot of markets who want to buy things cheaper than they would at their local grocery store.”

BJ's Werner said the company's typical client has an average household income of between $75,000 and $100,000. He added that in the new markets BJ entered, he was able to attract members who already belonged to another club.

Earlier this month, BJ's said it expects modest growth for the full year. The retailer said it expects comparable club sales to increase 1% to 2% year over year, excluding gas sales. It said adjusted earnings per share would range from $3.75 to $4.00, with the low end of that falling below the $3.96 it reported for its most recent fiscal year.

As of Tuesday's close, BJ's shares were up more than 12% this year. This performance outpaced the S&P 500's gain of more than 9%.