Do You Own BJ Stock? You May Want to Sell and Buy TJX Instead.

Let's start by saying there's nothing inherently wrong with BJ's Wholesale Club (NYSE: BJ), but there are more exciting options for investors in the retail space heading into 2026. One stock to keep on your radar is TJX Companies (NYSE: TJX). The parent company of brands such as T.J. Maxx, Marshalls, and HomeGoods is on a tear this year and has more flexibility to navigate economic uncertainty than BJ's.

BJ's has a competition problem

BJ's is a membership warehouse that competes with behemoths Costco Wholesale and Walmart's Sam's Club in the bulk retailer category. BJ's stock is up 5% year to date and trades at a reasonable price-to-earnings ratio of about 21.65 as of Dec. 16. However, the company could face headwinds in the near term as consumer sentiment and disposable income slip nationwide.

These factors that could potentially hold BJ stock back could also be the reason TJX soars. It may not seem like an obvious play, but considering which retailers will do well in the face of economic headwinds, TJX appears to be a winner.

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In BJ's latest earnings report, the club's sales increased by just 1.1% and 0.8% in the third quarter and first nine months of fiscal year 2025 compared to the same periods last year. Comparing third-quarter results from this year and last, BJ's saw slight declines in operating income, net income, earnings per share, and earnings before interest, taxes, depreciation, and amortization (EBITDA).

BJ's also doesn't have the advantage of scale like its competitors, Costco and Walmart. It doesn't have an international footprint and is truly more of a regional operation than a national one. BJ's currently operates fewer than 300 stores, mostly concentrated on the East Coast. As competition heats up for fewer discretionary dollars, BJ's is going to feel the pinch.

TJX is performing well this year

TJX, on the other hand, has had a big year. The company is up almost 30% year to date. It also exceeded sales and margin expectations in the most recent quarter. TJX raised its guidance for the upcoming year and expects to have a strong holiday season.

TJX is a compelling stock to own in uncertain economic times. The business operates under an off-price retail model, attracting customers seeking deep discounts. As shoppers are increasingly price aware and sensitive, discount retailers stand to profit the most.

Treasure-hunting is a type of shopping experience that TJX's stores excel in, both in brick-and-mortar and e-commerce formats. Unlike the predictable inventory BJ's has to maintain, TJX brands can also be more flexible, which helps the company maintain healthy margins. TJX reported a 1% increase in gross profit margins from the third quarter last year.

TJX is a solid buy, particularly in a time when shrinking consumer wallets are dominating the news.

Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, TJX Companies, and Walmart. The Motley Fool has a disclosure policy.