BJ’s Wholesale Club saw sales edge up in its fiscal 2019 first quarter and topped Wall Street’s earnings-per-share forecast by two cents.
For the quarter ended May 4, BJ’s totaled revenue of $3.14 billion, up 2.7% from $3.06 billion a year earlier. Net sales rose 2.5% to $3.07 billion from $2.99 billion, while membership fee income surged 8% to $73.4 million from nearly $68 million.
Comparable-store sales grew 2% year over year. Merchandise comparable sales, which excludes fuel, were up 1.9%.
Operating income came in at $70.7 million for the quarter, an increase of 9.5% versus a year ago.
“Our first-quarter results reflect a solid start to the year as we continued our transformation of our company. We're pleased with our performance and sales, earnings and cash flows,” Chairman and CEO Christopher Baldwin told analysts in a conference call Thursday morning. “For the quarter, we saw merchandise sales of 1.9%, representing a 3.9% two-year stacked comp. Sales were affected by the timing shift of SNAP government assistance benefits, which we discussed last quarter. Without the shift, our comp sales would have been above the high end of our full-year guidance range, which is 1.5% to 2.5%.”
The accelerated SNAP benefits particularly impacted perishables, namely stock-up segments like frozen, Chief Financial Officer Robert Eddy said in the call. Perishables, which had a 1% comp-sales decrease in the quarter, make up about half of a typical EBT basket, he noted.
“In our edible and nonedible grocery divisions, comps were 1% for the quarter. Excluding the EBT shift, edible grocery comps would have been closer to our recent full-year performance,” according to Eddy.
In grocery, BJ’s is working to simplify assortments, add new offerings and improve presentation to highlight value, the executives said.
“Our focus on value and in-club execution delivered growth in key areas of our fresh business during the quarter, including all of produce, rotisserie chicken, bakery and full-service deli,” said Baldwin. Strong penetration of private label — especially Wellesley Farms produce, meat and seafood — also has spurred value-driven purchases, he added.
“We see opportunities throughout our clubs to simplify our assortment with an emphasis on the most productive items and to enhance the member experience to improve displays and graphics,” Baldwin explained. For example, BJ’s is working with Starbucks on in-store signage and displays pairing coffee with complementary items. “We will start to apply our assortment learnings across a range of grocery categories beginning in Q2. As in other areas of the club, we expect the simplified assortment and great value to resonate with our members over time.”
At the bottom line, BJ’s posted 2019 first-quarter net income of $35.8 million, or 25 cents per diluted share, compared with $14.1 million, or 15 cents per diluted share, in the prior-year period, which included costs related to the company’s initial public offering. On an adjusted basis, net earnings were $36.7 million, or 26 cents per diluted share, for the 2019 quarter and $28.1 million, or 20 cents per diluted share, for the 2018 quarter, BJ’s said.
Analysts, on average, had projected adjusted EPS of 24 cents, with estimates ranging from a low of 21 cents to a high of 27 cents, according to Refinitiv/Thomson Reuters.
BJ’s reiterated its full-year earnings guidance for fiscal 2019. The Westborough, Mass.-based company forecasts adjusted EPS of $1.42 to $1.50 for the year. Wall Street’s average estimate is $1.47, with a range of $1.35 to $1.51.
“Our investments are focused on building capabilities across our strategic priorities, which are acquiring and retaining members, delivering value to get them shopping, making it more convenient to shop at BJ's and, of course, expanding our strategic footprint,” Baldwin told analysts during the call.
Growth in membership signups and renewals and BJ’s co-branded credit card has been robust, he said, adding that digital will be a cornerstone of the company’s efforts to enhance shopping convenience.
“We continue to invest in our digital products, properties, adding new capabilities and improving features rolled out over the last year,” Baldwin said. During the first quarter, BJ’s launched a new website feature enabling members to reorder previously purchased items, and the retailer has begun showcasing fresh items on BJs.com to highlight its breadth of selection.
“Sales driven by convenience features like buy online, pick up in-club and same-day delivery — while small relative to the rest of our business — continue to grow rapidly. Items that account for more than three-quarters of our sales are now available for same-day delivery at club store prices,” Baldwin noted. “We've also started to streamline the buy online, pick up in-club feature by enabling members to check in for pickup in our app, eliminating the need to wait in line.”
BJ’s also is continuing to test an express feature in its mobile app that allows customers to scan items as they shop and then pay at checkout by scanning a barcode. “While our current test is still quite small, this is a potentially transformational change for us,” said Baldwin. “We'll continue to learn from the ongoing test as we work to provide a more convenient, seamless shopping experience for our members.”
As of the end of the first quarter, BJ’s operated 217 warehouse clubs and 138 BJ’s Gas stations in 16 states. Last month, the company opened a new club in Clearwater, Fla.
“We're pleased with membership acquisition, which has exceeded our goals,” Baldwin said. “In the first quarter, we also broke ground on two clubs in eastern Michigan and are on track to open both clubs in Q4. We're actively looking at additional locations in this market.”