BJ's Wholesale Profit Climbs Sharply

BOSTON — BJ's Wholesale Club Inc. said Wednesday that its fourth-quarter profit quadrupled, beating Wall Street expectations, as the nation's third-biggest warehouse club benefited from a retail environment that is favoring discount stores.

BJ's also raised its earnings outlook for the full year, in part because inflation could boost business at discounters as shoppers increasingly look for bargains.

The company's shares climbed nearly 9 percent, rising $2.84 to $36.12.

BJ's said that strong January sales, higher profit margins and gasoline sales, and lower-than-expected expenses lifted its fourth-quarter net income to $50.2 million, or 80 cents per share. That's up from $11.9 million, or 18 cents per share, in the year-ago period — a result that was hurt by one-time items that combined to shave 40 cents per share off earnings.

The latest quarter's profit beat the consensus forecast of 74 cents a share by analysts surveyed by Thomson Financial.

Revenue rose 2 percent to $2.48 billion — just above analysts' forecast of $2.46 billion — from $2.43 billion in the previous year's fourth quarter.

Natick, Mass.-based BJ's operates 177 warehouse clubs in 16 Eastern states, and is dwarfed by larger rivals Costco Wholesale Corp. and Wal-Mart Inc.'s Sam's Club. Earlier Wednesday, Costco said its fiscal second-quarter earnings rose 31 percent on a 12 percent sales increase.

Warehouse clubs have benefited in the economic slowdown as more cost-conscious consumers buy goods in bulk in response to higher food and gas prices.

BJ's Chief Executive Herb Zarkin said a recent rise in inflation could benefit the company, if it remains modest.

"We're embracing inflation in this particular organization," Zarkin told analysts in a conference call. "The consumer has to come someplace to shop, and we are really a great value place for them to shop."

BJ's raised the guidance it offered in November that predicted fiscal 2008 earnings of about $1.90 per share. It now expects $1.98 to $2.08 per share — or about $118 million to $123 million — above analysts' consensus forecast for a profit of $1.92 per share.

The company expects total sales to rise 6.5 percent to 8.5 percent this year, with same-store sales rising 4 percent to 7 percent. It expects inflation to help drive same-store sales up 4 percent to 6 percent in the first quarter, absent any effects from gasoline sales.

While some specialty retailers are closing stores, BJ's said Wednesday it plans to expand more rapidly than last year, when it added two warehouse clubs. This year, BJ's plans four new stores in existing markets, with seven to nine locations to be added each in 2009 and 2010.

Zarkin, who has led a turnaround effort since his predecessor Mike Wedge resigned in November 2006 amid disappointing sales, said the company would continue a campaign that has included reducing the number of items BJ's offers and emphasizing merchandise with high profit margins.

The campaign yielded benefits last quarter, as sales of high-margin perishable foods including meat and dairy products rose 8 percent. That gain offset slow sales of items such as holiday seasonal products and toys.

"BJ's has been in a recovery mode, and management so far is doing a pretty good job," UBS analyst Neil Currie said.

Back To Top