BJ'S PROFIT SLIPS IN 1Q

MARK HAMSTRA

NATICK, Mass. - BJ's Wholesale Club here said declining traffic, rising costs and narrow margins on gasoline contributed to a weak first-quarter performance.

The company reported a 17.2% decline in first-quarter net income, to $15.4 million, compared with year-ago results.

Separately, activist investor Carl Icahn has taken a 3.7% stake in the retailer, which was reported by SN earlier this year to be drawing the interest of private investors for a possible buyout. Icahn Management, New York, could not be reached for comment.

Excluding gasoline sales, BJ's said traffic fell 3% in the first quarter, continuing a trend from the second half of last year. Comparable-store sales were up 2%, including 1.4% from gasoline sales.

Comparable-store sales of food were up about 2%, which represents a decline from last year's trends, "but a part of that is just coming off some very strong comps in the first quarter of last year," said Mike Wedge, president and chief executive officer, in a conference call discussing results for the 13-week period, which ended April 29. He cited meat as one grocery category that was "a little bit off."

Areas of strength in grocery included soda and water, household chemicals, paper products, health products and produce.

BJ's also had higher marketing expenses in the quarter as it experimented with some new initiatives, including price-and-item newspaper ads for the first time.

Asked by an analyst about the company's plans to ramp up its new-unit growth - the company intends to open 12-13 stores this year and 16-18 next year - despite difficulties in its core business, Wedge said it was important for the wholesale club operator to gain density in the markets where it operates.

Sales in the quarter were up 6.3%, to $1.88 billion.

1st-QUARTER RESULTS

Qtr Ended: 4/29/06; 4/30/05

Sales: $1.88 billion; $1.77 billion

Change: 6.3%

Comp-store: 2%

Net income: $15.4 million; $18.6 million

Change: -17.2%

Inc/Share: 23 cents; 27 cents