BJ’s third-quarter preview: Same-store growth expected to remain steady; further valuation gains depend on new openings
Citi expects BJ’s third-quarter same-store sales to grow 5%, close to the market consensus, and expects full-year guidance to remain intact. However, transaction growth is slowing and earnings forecasts have been trimmed; after the stock’s approximately 40% gain this year, further revaluation requires new-store expansion alongside improvements in traffic and margins.
Original source：Citi ResearchFirst published on Unhidea：Original source date：
Key takeaway
Citi believes BJ’s current traffic performance is sufficient to support maintaining full-year guidance, but a higher valuation requires faster openings while sustaining same-store growth and margin improvement.
Is the third-quarter hurdle an earnings beat or maintained guidance?
Citi expects BJ’s same-store sales to rise 5.0% year over year in the third quarter of 2026, slightly above the market consensus of 4.7% and broadly in line with expectations. Despite recent volatility in the operating environment, this performance is expected to support the company in maintaining its full-year revenue and earnings guidance.
Citi raised its third-quarter earnings per share forecast from 0.19 dollars to 0.20 dollars, but slightly lowered its full-year forecast. The improved quarterly outlook did not result in an increase to its full-year earnings estimate.
Sales are accelerating, so why watch transaction counts?
Traffic-tracking data cited in the report show restaurant visits rose 9.6% year over year, with the growth rate up 2.5 percentage points from the prior quarter; market share was broadly flat quarter over quarter, and the US national average generally outperformed California. Traffic improved, with regional differences.
Second Measure data show sales rose 5.7% year over year, with growth accelerating by 1 percentage points from the prior quarter; transaction counts rose 4.7% year over year, but their growth rate slowed by 0.5 percentage points. Average spend per transaction rose 1.0% year over year, with growth accelerating by 1.4 percentage points. This indicates that as sales growth accelerated, transaction growth momentum weakened and support from average spend per transaction strengthened.
Citi is therefore watching whether young customers visiting for the first time because of the Pizookie dessert bundle can be converted into repeat customers who spend at a higher level. This bears on whether promotion-driven first visits can develop into more lasting traffic.
Why have new openings become the key to the next phase?
BJ’s previously achieved traffic growth and modest restaurant margin expansion without increasing its store count. Citi believes greater share-price upside requires faster new-store expansion while both improvements continue.
Citi expects the pace of openings to pick up somewhat in the fourth quarter of 2026 and more noticeably in 2027; however, the current pace of expansion remains well below historical levels and peers. Simultaneous improvement in all three measures has also been difficult for the brand to achieve in the past, so faster openings alone are not enough: same-store sales and margins must improve alongside them.
An important point in the after-market earnings release and conference call on 5 November will be management’s initial comments on its 2027 opening plans and longer-term pipeline, which will directly affect whether expansion can take over from improvements at existing restaurants.
With operations still improving, why did Citi cut its target price?
Citi slightly adjusted its margin assumptions, lowering its earnings per share forecasts for 2026 and 2027 from 2.40 dollars and 2.63 dollars to 2.39 dollars and 2.59 dollars, respectively. It also cut its target price from 75 dollars to 70 dollars and maintained its “Neutral/High Risk” rating.
The 70-dollar target price uses an EV/EBITDA multiple of 9 times, applied to the forecast for the following 12 months of EBITDA measured from a point one year ahead. The valuation implies a relative multiple of approximately 0.7 times, consistent with the prior methodology and the historical five-year average excluding the pandemic, reflecting a trade-off among healthy traffic, margin improvement and a relatively slow pace of openings.
As of 22 October, the stock had risen approximately 40% this year, outperforming the full-service restaurant sector and the broader market; the 70-dollar target still implied 19.1% upside from that day’s share price of 58.79 dollars. Citi believes a further increase in the valuation multiple requires operating results that show expansion and efficiency improving together.
