BJ's Outlook Conservative

NATICK, Mass. — Recent performance notwithstanding, BJ's Wholesale Club isn't cuddling up to economic turmoil.

The warehouse club retailer last week acknowledged that worsening economic conditions during the fiscal first quarter sparked robust sales and earnings, but cited the same uncertain economy for a “cautious” upgrade in its outlook for the year.

“We think we are going to do very well, all things considered,” Herb Zarkin, chief executive officer, said in a conference call with analysts. “But who knows what is going to happen out there. Things are really going nuts.”

Zarkin was responding to a question from an analyst over a financial forecast for the second half of the year considered conservative given strong results in the first quarter.

BJ's earned $17.2 million, or 29 cents per share, during the first quarter that ended May 3, a 26% increase from the same period a year ago. Quarterly sales of $2.3 billion increased 12.3% in the first quarter, with comparable-store sales increasing by 9.6%, or 5.7% excluding gasoline.

BJ's officials said earnings gained due to increases in store traffic and comps, as well as increased merchandise margins except in gasoline. A 3% increase in store traffic was BJ's strongest increase in that metric in four years and, according to Zarkin, “is a very encouraging sign of the strength in our business.”

Comparable sales were strong, particularly in food and consumables, with food comps growing by 8% and perishable foods by 10%. Sales of items like prepared meals improved while casual restaurant dining decreased, Zarkin pointed out. He estimated that cost inflation added between 1% and 2% to comps during the quarter.

The strong results prompted officials to raise their yearly earnings guidance by 6 cents a share, to a range of $2.04 to $2.14, which includes 4 cents.

The forecast reflects “uncertainty in the macroeconomic environment,” according to Frank Forward, BJ's chief financial officer.