BJ'S TESTS PHARMACIES, FREE MEMBERSHIPS

NANCY BRUMBACK

NATICK, Mass. (FNS) -- BJ's Wholesale Club said it has been pleased with the initial results from its testing of in-store pharmacies.

When the chain entered the Atlanta market with three warehouse clubs in early May, all three stores included pharmacies. A BJ's in the Boston suburb of Stoneham began the test when it was retrofitted with a pharmacy about six weeks ago.

John J. Nugent, president and chief executive officer, said after BJ's annual meeting that the pharmacy project is still in the test phase. "We really need a couple more comp clubs to determine if we get the same results. We've been very happy with the results in Stoneham."

Pharmacies will open in existing stores in Danvers and North Attleboro, Mass., at the end of the second quarter or early in the third, he said, adding that BJ's expects to be able to read those results relatively quickly.

Nugent told shareholders the Atlanta opening has been strong, with the stores averaging sales of over $1 million each in each of the first two weeks of operation.

BJ's is also testing free one-year memberships in Atlanta, available for a couple of months during the grand-opening period.

"We recognize we need paid memberships in the long run, but this is a good way to test if we can get a larger portion of typical wholesale club members quickly," he told SN.

BJ's opened 12 wholesale clubs and 25 gasoline stations in 2001. Four new clubs have already opened this year, including the first three of five planned for Atlanta, bringing the total to 134 clubs and 57 gas stations. Four more are scheduled for the second quarter, in Bowie, Md., Richmond, Va., West Lebanon, N.H., and Conyers, Ga.

In the third quarter, five BJ's will open, in Brooklyn, Queens and Monroe, N.Y., Hamilton, N.J., and Raleigh-Durham, N.C. The fifth Atlanta-area store will open in the fourth quarter.

The chain plans to add six to eight additional gasoline stations in the second quarter, and 10 to 15 in the second half. Asked about a report BJ's is considering adding car washes at its clubs, Nugent said no decision has been made and that's just one of many ancillary businesses the company has looked at.

BJ's is also boosting its private-label sales, now some 250 items. Private label accounted for 4% of sales in 2001 and is projected at 6% for this year, he told shareholders.

Asked about the percentage of its sales from food, Nugent said, "We look at ourselves as a big supermarket. About 70% of the items in our normal shopping basket are items you'd find in every supermarket in the U.S.," including such items as film, batteries and paper goods, as well as food. He added the chain is happy with that situation. "Consumables generate frequency."

In its first-quarter financial report released two days before the annual meeting, BJ's reported net sales for the quarter ended May 4 increased 11.1% to $1.3 billion. Comparable-store sales were up 4% for the quarter.

Net income was $23 million or 32 cents diluted earnings per share for the quarter, compared to $22.9 million or 31 cents diluted earnings per share last year.

Results for the quarter included a non-operating interest accretion charge of $1.4 million pretax related to the chain's liability for House2Home leases.