BJ’s Wholesale Club Inc. (BJ), a leading warehouse club operator in the United States, recently posted healthy sales results for the four-week period ended April 30, 2011.
After registering a jump of 5.3% in March 2011, BJ’s experienced comparable club sales growth of 8.5% in April. Rising gasoline prices positively impacted comparable club sales by 4.4% during the four-week period. The company indicated that comparable club sales rose 4.6% in the prior-year period.
For the thirteen-week period ended April 30, 2011, comparable club sales climbed 6.3%, including a contribution from gasoline sales of 3.9%.
Comparable club sales increased in the first three weeks. The fourth week saw a decline. Excluding gasoline sales, the company’s merchandise comparable club sales for April climbed 4.1% compared with an increase of 0.8% in the same month last year. During the thirteen-week period, merchandise comparable club sales advanced 2.4%.
Management hinted that merchandise comparable club sales for April 2011 were favorably impacted by approximately 2.7% due to shift in the Easter holiday compared with an adverse impact of 2.5% in the prior-year period.
Net sales for April jumped 12.2% to $871.7 million from $777 million in the same month prior-year. During the thirteen-week period, net sales rose 10% to $2,769.1 million from $2,516.4 million.
Excluding gasoline sales, the average transaction amount rose by approximately 1%, whereas traffic climbed about 3%.
Heavy job losses and the recent economic downturn have changed the way consumers used to shop. BJ’s hinted that food sales grew 7% for April, which contributed to the growth of comparable club sales. Sales of general merchandise dropped 1% for the month.
By categories – bakery, candy, cheese kiosk, coffee, dairy, deli, electronics, frozen, meat, milk, plates/utensils, prepared foods, produce, salty snacks and small appliances reported robust sales. On the contrary, apparel, cigarettes, diapers, oils/shortening, paper, pre-recorded video, soda, sporting goods, summer seasonal and televisions delivered sluggish sales.
BJ’s, which faces stiff competition from Costco Wholesale Corporation (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.
BJ’S WHOLESALE (BJ): Free Stock Analysis Report
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