BJ's Sees Groceries Driving 2009 Comp-Sales Gains

ELLIOT ZWIEBACH

NATICK, Mass. — BJ's Wholesale Club here is anticipating comparable-store sales increases of 5% to 7% this year — following a gain of 6.4% in 2008 — with groceries leading the way, Laura J. Sen, president and chief operating officer, said last week.

“That guidance reflects the fact we still have plenty of merchandising and operational opportunities available that can generate sales growth,” she said. “In the month of February, for example, our merchandise comp sales [encompassing all products sold inside the club, excluding gasoline] increased 8.2% in spite of all the economic and deflationary pressures out there.”

The anticipated comp-sales gains are likely to come “at the cost of flat margin,” she pointed out. “But we're operating the business for the long term, and we believe the market-share gains we make during the troubled economy will endure when the economy improves.”

Sen made her remarks during a conference call with investors to discuss financial results for the fiscal year and fourth quarter, which ended Jan. 31.

For the year, net income was up 9.5% to $134.6 million, while sales increased 11.2% to $10 billion. Comparable-store sales rose 9.4% — including the 6.4% rise in merchandise comps, excluding gas.

For the fourth quarter, net income rose 4.8% to $52.7 million, while sales increased 3.2% to $2.6 billion and comps rose 1.7%, including a 6.4% gain — the same as for the year — in merchandise comps, excluding gasoline.

Sen said she expects the sales to come from “real grocery shoppers.”

“We're succeeding in getting the family in every week for their perishable needs,” Sen said.

BJ's is continuing to take share from the supermarket and restaurant channels, she said, with food comps up 11% in the fourth quarter and up 10% for the full year — “strong evidence our members are consistently spending more of their food and consumables budget with us,” she said, “with perishables, our highest-margin category, continuing to outpace all other departments.”

According to Deborah Weinswig, an analyst with Citigroup Global Markets, New York, “BJ's improved merchandise assortment, including perishables, restaurant-branded prepared foods and smaller pack sizes, are driving market-share gains from the supermarkets. However, increasing square-footage growth in a challenging economy could be difficult.”

Chuck Cerankosky, an analyst with FTN Midwest, Cleveland, said BJ's ongoing efforts to improve its food operations are coming to fruition at just the right time for the club operator.

“BJ's emphasis on food has been under way for a long time, and now it's doing a better job with it, especially fresh foods — and with consumers so focused on finding good values, it's all coming together at the right time,” he said.

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