BJ’s Delivers Healthy Sales

BJ’s Wholesale Club Inc. (NYSE:BJ), a leading warehouse club operator in the United States, recently posted healthy sales for the five-week period ended April 2, 2011.

After registering a growth of 5.5% in February 2011, BJ’s experienced comparable club sales growth of 5.3% in March. Rising gasoline prices positively impacted comparable club sales by 4% during the five-week period. The company indicated that it had posted comparable club sales growth of 10.6% in the prior-year period. For the nine-week period, comparable club sales increased 5.4%, including a contribution from gasoline sales of 3.6%.

BJ’s witnessed increased comparable club sales in the first four weeks but a decline in the fifth week. Excluding gasoline sales, the company’s merchandise comparable club sales for March climbed 1.3% compared with an increase of 7.3% in the same month last year. Management hinted that merchandise comparable club sales were adversely impacted by approximately 2% due to the shift in the Easter holidays. For the nine-week period, merchandise comparable club sales increased 1.8%.

Net sales for March jumped 9.1% to $1,083.3 million from $992.7 million in the same month prior-year. For the nine-week period, net sales rose 9.2% to $1,897.4 million from $1,737.3 million.

Excluding gasoline sales, Traffic remained flat and the average transaction amount rose by approximately 1%. Shift in the Easter holidays, negatively impacted the traffic by about 2%.

Heavy job losses and the recent economic downturn have changed the way consumers used to shop. BJ’s hinted that food sales grew 3% for March, which contributed to the growth of comparable club sales. Sales of general merchandise dropped 2% for the month.

By categories –– breakfast needs, household chemicals, coffee, cookies & crackers, dairy, frozen, health & beauty, juices, meat, milk, paper, prepared foods, produce, salty snacks and small appliances reported robust sales. On the contrary, apparel, beer, books, cigarettes, diapers, plants, pre-recorded video, sporting goods, televisions and toys delivered sluggish sales.

BJ’s, which faces stiff competition from Costco Wholesale Corporation (NASDAQ:COST) currently operates 190 warehouse clubs in 15 states.

BJ’s Wholesale will sustain its investments in Club payroll and Club remodels to augment the sales of perishable items, which have been the driving factor, and have helped increase sales and gain market share. However, we believe that a sluggish economic recovery and a weak consumer spending environment could intensify the competition, as supermarket stores and other warehouse club operators could offer compelling prices to lure consumers.

Currently, we have a long-term Neutral rating on the stock. Moreover, BJ’s Wholesale holds a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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