Shares of BJ’s Wholesale Club Inc. (BJ) have shown strength over the past couple of sessions after reporting better-than-expected results for its fiscal fourth-quarter ending January 31, 2009.
The company, which operates 180 wholesale clubs in 15 states, said its net income grew to $52.7 million, or 89 cents per share excluding 2-cent-per-share gain for favorable state income tax audit statements.
A year ago, BJ’s earned $50.2 million, or 80 cents per share in the fourth quarter. Sales grew 3.2 percent to $2.56 billion, while sales at its clubs open at least a year grew 1.7 percent. Analysts polled by Thomson Reuters were expecting, on average, earnings of 86 cents per share excluding one-time items on sales of $2.63 billion.
Not surprisingly the company said food sales rose 11 percent in the quarter and that sales of non-food items were flat. BJ’s was able to take market share from traditional grocers as consumers worried about making ends meet looked to its membership clubs for savings.
CEO Laura Sen said during the company’s conference call to investors, “For BJ’s, economic downturns create challenges and opportunities. We are strategically looking to take advantage of downturns to gain market share and we are very optimistic about BJ’s long-term prospects.”
BJ’s said it is outlining big ambitions for the coming year to take more market share away from the traditional grocers where its customers still do most of their food shopping. The company said it will focus on more fresh and prepared foods and also seek to lower its prices.
The strategy appears to be working — same store sale rose 6.4 percent in the quarter excluding gas, which saw much lower prices than a year ago amid weakening demand. Who says you can’t improve your business during a recession?
The strategy is not without peril however. Executives said much of the gains the company made with expense controls and growth of sales and customer base were offset by lower margins on merchandise.
Still, the company is projecting earnings of $2.26 to $2.36 per share in 2009 based on a 5 percent to 7 percent increase in merchandise comparable store sales driven by food and consumables. Analysts are expecting earnings of $2.28 per share.
Chief Financial Officer Frank Forward said inventories fell 3.7 percent on average per club, reflecting tremendous execution from the company’s merchandising and logistics team.
The company’s balance sheet had $51 million in cash at the end of the year and no debt. BJ’s bought back 1.8 million shares last quarter and still has $209 million available for repurchases under its current authorization.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
