Costco, Sam’s Club and BJ’s open new stores and gain members

On Costco’s last earnings call, executives were grilled about a problem few companies have: how is the company managing crowded stores and jammed-up parking lots?

That dilemma is a sign of the times for membership-based warehouse clubs. More Americans have literally joined the club — fueling growth for Costco, Walmart-owned Sam’s Club and BJ’s.

All three retailers are opening more locations across the country. Shares of the companies have shot up in the past five years, with Costco’s stock up about 215% and BJ’s up about 305% since the day the Covid pandemic began in March 2020. And Gen Z and millennial shoppers have helped fuel the club channel’s gains, as trendier brands and more convenient digital offerings attract younger shoppers.

High inflation “brought the club channel more and more into focus,” said Bobby Griffin, a consumer analyst at equity research firm Raymond James. The clubs have long been known as a place to buy cheaper gas or bulk packs of household staples for less.

Yet the companies have continued to “up the ante,” he said. Merchandise has gotten sharper, private label offerings have become stronger and the shopping experience has gotten more enjoyable as the retailers have spruced up stores and added more technology, he said.

Clubs have benefitted from an element of surprise, too. Along with selling bulk packs of paper towels and Keurig coffee pods, clubs have caught the attention of shoppers with items that tap into a desire for dupes or go viral on social media — such as Costco’s gold bars, which racked up more than $100 million in sales in a single quarter.

Along with the breakaway hit of gold bars, the many card-carrying members of Costco prompted an unusual message from the U.S. Transportation Security Administration this year. As the government agency phased in stricter requirements for ID cards, it announced across its social media accounts in June that Costco’s membership cards don’t count as a Real ID.

And Costco’s loyal fan following helped it to post strong sales — and attract support — despite some backlash for sticking by its diversity, equity and inclusion policies.

As they pick up newer and younger members, the warehouse clubs see more room for growth.

Sam’s Club earlier this year announced plans to open 15 clubs per year going forward, along with renovating its approximately 600 current clubs. It’s expanding its footprint again after shutting 63 locations across the country in 2018.

BJ’s plans to open 25 to 30 new clubs over the next two fiscal years. The smallest club player, which has historically had more locations on the East Coast, has broken into new markets like Texas by opening four locations in the Dallas-Fort Worth area.

And Costco has stuck with an aggressive expansion plan of opening about 30 clubs per year, with just over half of those in the U.S. and the rest in other parts of the globe, CFO Gary Millerchip told CNBC. In early August, Costco opened four clubs in three different countries: Quebec, Canada; North Guadalajara, Mexico; The Villages in Florida and Richland, Washington.

Costco is opening some of its new locations this year in existing markets where its clubs are crowded, Millerchip said.

Club retailers still face pressure, though, including an uncertain job market and tariffs. The companies have laid out strategies to reduce their hit from the duties: Costco leaders, for example, said on an earnings call that they diverted imported merchandise with high tariffs to their warehouse clubs in other parts of the world instead of the U.S.

Clubs’ rotating brands and treasure hunt approach could reduce their vulnerability to tariffs. While the retailers sell imported merchandise like furniture and clothing, the bulk of sales come from groceries, and the retailers could swap out or drop an item hit by high tariffs, Griffin said.

BJ’s will carry more holiday items this year from the U.S. or countries with lower tariff exposure, said Bill Werner, BJ’s executive vice president of strategy and development.

As retailers digest the long-term effects of tariffs, Costco will give the latest read on its business, and the club channel, when it reports earnings on Thursday.