Food Sales Drive BJ's 4Q Profits

BJ's Wholesale Club last week reported a sharp rise in fourth-quarter net income, citing strong sales of high-margin items such as perishables. The company joined fellow club store operator Costco Wholesale, which reported results the same day, in saying that they believe they are benefiting from consumers looking for grocery bargains (see Page 53.) Looking ahead, our greatest challenge

NATICK, Mass. — BJ's Wholesale Club here last week reported a sharp rise in fourth-quarter net income, citing strong sales of high-margin items such as perishables.

The company joined fellow club store operator Costco Wholesale, which reported results the same day, in saying that they believe they are benefiting from consumers looking for grocery bargains (see Page 53.)

“Looking ahead, our greatest challenge in 2008 is also our greatest opportunity,” said Herb Zarkin, chairman and chief executive officer, BJ's, in a conference call discussing results for the quarter. “The combination of inflation and economic stagnation has families looking for ways to reduce expenses. We need to turn up the volume on our message to families that they do not have to sacrifice quality to save money.”

Net income for the quarter, which ended Feb. 2, totaled $50.2 million, vs. $11.9 million in the year-ago period. Sales for the fourth quarter, which included one less week than the preceding year, were up 1.9%, to $2.4 billion. Comparable-store sales, adjusted for the extra week, were up 5.4% in the fourth quarter, including a bump of 2.4% from gasoline. Comp-store sales of perishables were up 8.4% for the quarter, offsetting flat sales in some general-merchandise categories, the company said.

Net income for the full year was $122.9 million, vs. $72 million in the preceding year. Sales for the 52-week year were up 6.2%, to $8.8 billion, compared with the 53-week preceding year. Adjusted comps for the full year rose 3.7%, including a 1.1% bump from gasoline.

“Throughout the year, the main driver of our perishable businesses were fresh produce, fresh meat, prepared foods, as well as frozen foods and dairy items,” said Zarkin.

He said the chain was seeking to offset inflation to some degree by reducing club-pack sizes.

“This strategy has worked well for us with our fresh meat, fish department, as well many commodities over the past,” he said.