BJ’s Wholesale Club Inc.(BJ), a leading warehouse club operator in the United States, recently posted healthy sales results for the five weeks period ended July 2, 2011.
After registering a jump of 7.4% in May 2011, BJ’s experienced comparable club sales growth of 7.3% in June. Rising gasoline prices aided comparable club sales by 3.8% during the five-week period. Comparable club sales growth, in the reported month, fared much better than 3.8% in the prior-year period.
For the twenty two-week period ended July 2, 2011, comparable club sales climbed 6.7%, including a 3.9% contribution from gasoline sales.
Comparable club sales increased in all the five weeks. The second week saw robust growth. Excluding gasoline sales, the company’s merchandise comparable club sales for June climbed 3.5% compared with an increase of 3.2% in the same month last year. During the twenty two-week period, merchandise comparable club sales rose 2.8%.
Net sales for June jumped 10.3% to $1,176.9 million from $1,067.3 million in the same month last year. During the twenty two week period, net sales rose 10.2% to $4,899.1 million from $4,444.5 million.
Excluding gasoline sales, the average transaction amount rose by approximately 4%, whereas traffic remained flat, in June 2011.
Heavy job losses and the recent economic downturn have changed the way consumers shop. BJ’s hinted that food sales grew 5% for June, contributing significantly to the growth in comparable club sales. Sales of general merchandise increased 1%.
By categories –– beauty care, chemicals, coffee, computer equipment, cookies, dairy, deli, eggs, frozen, lawn & garden, meat, milk, paper, prepared foods, produce, salty snacks, small appliances and summer seasonal reported robust sales. On the contrary, diapers, pre-recorded video and televisions delivered sluggish sales.
Costco Wholesale Corporation(COST), proffering tough competition to BJ’s, reported a robust growth of 14% in comparables for the month of June.
BJ’s Wholesale will sustain its investments in Club payroll and Club remodels to augment sales of perishable items, which have been the driving force behind increasing sales and market share gains. However, we believe that sluggish economic recovery and a weak consumer spending environment could intensify competition, as supermarket stores and other warehouse club operators could offer compelling prices to lure consumers.
Currently, we have a long-term “Neutral” recommendation on the stock. Besides, BJ’s Wholesale holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating.
BJ’S WHOLESALE (BJ): Free Stock Analysis Report
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