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PORTLAND — BJ's Wholesale Club Inc. said Wednesday that its first-quarter profit rose nearly 42 percent as shoppers flocked to its stores for necessities, leading the company to raise its 2009 profit guidance.
The nation's third-biggest warehouse club has seen its business grow during the recession as consumers turn to such stores for deals on food and items they use daily.
BJ's said it saw strong sales of staples like cereal, dairy items, fresh meat, household and heath and beauty products as well as televisions and computer equipment during the quarter. But sales of other higher-end products like jewelry, electronics and tires were weak.
Sales in food jumped an estimated 9 percent and general merchandise sales grew 4 percent at comparable clubs, or those open at least a year.
"BJ's strong value proposition continued to drive market share gains during difficult economic times," said Chief Financial Officer Frank Forward.
The Natick, Mass.-based company earned $24.3 million, or 45 cents per share, in the quarter ended May 2. That's up from $17.2 million, or 29 cents per share, a year earlier. Analysts surveyed by Thomson Reuters expected earnings of 44 cents a share.
Revenue was virtually flat at $2.31 billion due to the drag of gas sales compared to a year earlier, when prices at the pump were high.
Comparable-club sales overall fell 1.5 percent, largely due to a 9 percent hit from gasoline sales, which are about half of what the company saw last year.
BJ's, which operates primarily in the Northeast, faces tough competition from larger national chains like Costco Wholesale Corp. and Wal-Mart Stores Inc.'s Sam's Club division. But it has made merchandising and operational improvements in the past few years to emerge as a stronger rival.
The company was able to increase traffic in its stores by 7 percent and average transactions rose by 1 percent, indicating that shoppers are spending at or above the same level as last year. And BJ's heavier emphasis on food than some competitors has been a boost during the economic downturn as consumers keep their spending focused on necessities.
But Credit Suisse analyst Michael Exstein said in a note Wednesday that Costco has opportunities to gain market share and upgraded his rating on the chain. BJ's is trying to attract supermarket customers, while Costco remains a "pure" warehouse, he said, and Sam's Club is in the middle of a management transition. Costco reports its earnings next week.
BJ's said it now expects to earn $2.44 to $2.54 a share for the year, an improvement over its previous guidance of $2.42 to $2.52. Analysts expect $2.49 per share, on average.
However, executives said that while the company had a "truly excellent" quarter, it still faces challenges. BJ's said the weaker gasoline sales and internal investments in technology as well as store openings could hurt results.
The company also said it bought back 2.38 million shares worth about $70.4 million during the quarter. Another $138.2 million remains for future buybacks under the current plan.
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