NATICK, Mass. -- BJ's Wholesale Club here said last week it plans to offer a wider assortment, smaller packaging and easier in-store navigation to be more appealing to women.
"Will that make us more like a supermarket?" Mike Wedge, president and chief executive officer, asked rhetorically in a conference call with securities analysts. "We are committed to the wholesale club model, and that's different than a supermarket."
Wedge said BJ's is making the changes to increase its focus on retail members as part of an effort to differentiate itself from supercenters and from its two major competitors: Costco Wholesale Corp., Issaquah, Wash.; and Sam's Clubs, Bentonville, Ark., both of which have made major efforts to attract more business members.
The conference call followed the release of BJ's year-end financial results and fourth quarter ended Feb. 1, which showed total annual revenues, encompassing sales and membership fees, rising 12.2% to $5.9 billion, comparable sales increasing 2%, and net income climbing 59% to $130.9 million. For the 13-week fourth quarter, sales were up 12.4% to $1.7 billion, comps rose 1.6%, and net income declined 14% to $48.5 million.
According to Wedge, the changes BJ's is making followed a comprehensive review with outside consultants during the second half of 2002. The changes are designed "to enhance BJ's position relative to competition," he explained.
The changes will include the following:
Pricing. "Our review indicated we could achieve the best long-term results by shifting to a share-grabbing approach to pricing," Wedge explained. "We won't lead the way into price wars or sell below cost, but we will be more aggressive on sharpening prices to draw traffic."
Quality. "We intend to put more distance between BJ's and supercenters in quality by improving taste levels -- dropping the 'good' products in a good/better/best progression and going to 'better' or 'best.'
"We've seen sales increase where we've tested quality upgrades, and we've been able to generate higher sales volumes and greater member retention by improving our merchandise quality without raising prices, even though that puts pressure on margins in the near term."
Selection. BJ's intends to make its clubs more attractive to women by adding more in-store pharmacies; expanding the assortment of health and beauty care items, jewelry and apparel; and reducing inventories of office supplies, sporting goods and tools, Wedge said.
Packaging. "Members like consumer sizes, so we will expand that assortment in select categories," Wedge said. BJ's is conducting tests in Cleveland of what he called "wife-sized packaging," encompassing smaller packages of milk, dairy products, baked goods, produce, fish, meat and pet foods, he said.
Club appearance. BJ's plans to renovate and update 35 clubs this year using the prototype decor developed for its four Atlanta-area units, including better signage to improve in-store navigation; resets and expansions of in-store bakeries for a more effective presentation; and the addition of deli departments and rotisserie chicken, Wedge said.
It also plans to move produce from the back wall to a higher-traffic main aisle with an enhanced presentation; relocate bakery from the front to the back of the store with an upgraded presentation; and display prepared foods in coffin cases for better exposure, Wedge said.
Expansion. BJ's plans to open 14 new clubs this year -- although one club may not open till 2004, Wedge noted -- including nine in the Northeast (including three in Massachusetts, two in New Jersey and single units in New Hampshire, Connecticut, Pennsylvania and New York) and five in the Southeast (including three in Georgia and single units in Florida and Maryland).
