BJ’s enters ’09 fueled up on a positive note

NATICK, Mass. —BJ’s Wholesale Club is heading into the final days of the holiday season as one of the nation’s few retailers with the wind at its back after reporting solid third-quarter results.

The company has experienced favorable business trends throughout much of 2008 and during its recently ended third quarter, reported solid growth in sales and profits as value-conscious consumers in the Eastern United States, where the company’s clubs are concentrated, sought low prices on food and consumables for personal use.

Sales for the quarter increased 13.4% to roughly $2.4 billion and profits increased 24.2% to $28.2 million. Same-store sales increased 6.6%, excluding the impact of gasoline prices. Favorable business trends, strength in perishables, improved margins and expense control, combined with what the company called “unusually strong gasoline sales and profits,” resulted in earnings per share of 48 cents. That figure was in line with the company’s guidance, which had been increased on Nov. 6 to a range of 45 cents to 49 cents.

The day after BJ’s reported its financial results, chairman and ceo Herb Zarkin was in front of investors at the Morgan Stanley Global Consumer & Retail Conference, sharing his views on the company’s performance and outlook for the holiday season.

“In common with all retailers, we expect the reduced consumer spending power will have a significant negative impact on the discretionary spending this holiday season, and we have adjusted our assortments and our inventories accordingly,” Zarkin said. “Consumers may have lost their appetite for luxury items, but there will still be a Christmas.”

BJ’s is well positioned to benefit from the ongoing trend of cost-conscious shoppers seeking value at warehouse clubs. It saw that trend play out in the third quarter as customer traffic increased by 5% and average transaction size grew 2%.

“This trend tells us that our members shop with us more frequently and spend very freely on each visit,” said cfo Frank Forward.

The company’s favorable business trends, coupled with operations and systems upgrades the past few years, have BJ’s on track to resume substantial growth next year as the company plans to add six to eight new units to its existing base of 177 clubs.