BJ's CEO: Sen Likely Successor

JON SPRINGER

NATICK, Mass. — It appears BJ's Wholesale Club won't have to search very far for its next chief executive after all.

Herb Zarkin, the veteran chairman of the retailer who is serving his second term as CEO, last week said that Laura Sen, BJ's current chief operating officer, would be his likely successor when he steps down again. Zarkin noted that the retailer's board of directors had not yet voted on the matter, and he declined to give a precise timeline for the succession, but he spoke with more certainty on the topic than he did a year ago, when he told analysts he would conduct a formal search.

“It is no secret she is going to take over,” Zarkin said last week. “It is just a question of when.”

BJ's recent performance, particularly against the headwinds of the economy, speaks loudly for his colleague's credentials, he added. His remarks came as BJ's reported a 24% increase in net income on a sales increase of 11.9% during the fiscal third quarter, which ended Nov. 1.

The performance — sparked in part by falling gasoline prices creating unexpected sales and profit gains — contrasted with that of competitors, including Costco Wholesale, and is testament to a strong value offering and an effective turnaround engineered by Zarkin and his staff, analysts said last week.

“We were impressed with BJ's strong [quarterly earnings] results and believe that improvements in merchandising, particularly in perishables, are resonating well with consumers and leading to market share gains,” Deborah Weinswig, an analyst with Citi Investment Research, New York, said in a research note.

Zarkin, BJ's chairman and former CEO, returned to his post two years ago to succeed Mike Wedge. The chain at that point was beset by slow sales, sluggish earnings and takeover rumors, and, analysts said, had lost focus on its core strength in strong everyday value in food and consumables.

Zarkin promoted Sen to COO last January. Their plan involved a sharper merchandising focus that rid the chain of slow-selling items, including hundreds of private-label products that in BJ's estimation did not rank as “better” or “best” quality.

“We had about 25% fewer private-brand items at the end of this year's third quarter than we did a year ago, and I'm happy to say that our 12% [private-label] sales penetration for the quarter was within 1% of where it was this time last year,” Sen said last week. “In sum, it shows that the SKUs we maintained are working harder and producing more.”

“Prior management got a little carried away with couponing, and, in our opinion, merchandising on the consumables side was hijacked by the vendors,” Chuck Cerankosky, an analyst for FTN Midwest Research, Cleveland, told SN last week. “Now BJ's has the merchandising back under management's control, and they're cognizant of the categories that perform.”

BJ's success in comparison with Costco — which earlier this month posted negative comparable-store sales for October — is explained partially by the fact that BJ's locations along the East Coast are less affected by discounter competition, and also because the chain is less reliant on general merchandise sales, Cerankosky added.

“BJ's did not have as much to lose in the general merchandise category as Costco, so Costco has felt the slowdown in general merchandise sales more,” Cerankosky said. “But we feel BJ's has been making strides in its general merchandise. They've got economic headwinds against them, but the progress is there. Otherwise we'd be seeing a large falloff in their general merchandise sales.”

BJ's said general merchandise sales were down by 1% overall for the quarter, reflecting a slowdown in big-ticket items such as televisions, Sen said. However, she pointed out that food sales more than made up for the difference, with comp food sales up by 11% in the quarter.