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BJ’s expands into Michigan

Third-quarter results show further momentum since IPO

Russell Redman

November 21, 2018

4 Min Read
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BJ’s Wholesale Club plans to enter a new state next year with the opening of two stores in eastern Michigan.

Also after market close yesterday, BJ’s reported fiscal 2018 third-quarter earnings that beat Wall Street’s projections, fueled in part by revenue and same-store sales gains.

The Westborough, Mass.-based warehouse club chain said it aims to open clubs in Madison Heights and Taylor, Mich., in 2019. Serving metropolitan Detroit, the new clubs will carry a wide array of prepared foods; an extensive selection of fresh foods, including produce, meat, bakery and deli; and a range of convenience-focused services, including buy online/pickup in-club and digital coupons. Each club also will have a BJ’s Gas Station.

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Michigan will mark the 17th state for BJ’s, which operates 216 clubs and 136 gas stations overall. The move also will extend the retailer’s trade area farther in from East Coast. Currently, 14 of the 16 states with BJ’s locations are on the East Coast, save for Ohio and Pennsylvania.

BJ’s noted that it’s seeking sites for more clubs in the Detroit area. The company said its stores offer grocery prices that are 25% less than supermarkets and, in metro Detroit, will enable families to save about $500 annually on groceries.

“We’re thrilled to enter such a dynamic market and be a part of Michigan’s future,” Chairman and CEO Christopher Baldwin said in a statement. “BJ’s is known for helping hard-working families save money, and metro Detroit is a great fit for our clubs. Our expansion into this market is the result of our new, data-driven model for opening clubs, and we see significant potential in the region. We’re ready to serve eastern Michigan families and bring great career opportunities to the area.”

Related:BJ’s readies for big membership push

For the third quarter ended Nov. 3, BJ’s totaled sales of $3.15 billion, up 4.2% from $3.02 billion a year earlier. Membership fee income rose 10.1% to $71.4 million.

Comparable-club sales grew 3.6% year over year. Merchandise comp sales, which exclude fuel sales, edged up 1.9%, which BJ’s said represented its fifth straight quarter of increases.

Net earnings in the quarter were $54.4 million, or 39 cents per diluted share, compared with $22.8 million, or 25 cents per diluted share, a year ago. Adjusted earnings came in at $53.8 million, or 39 cents per diluted share, versus $35.1 million, or 25 cents per diluted share, in the prior-year period.

On average, analysts had forecast adjusted earnings per share of 34 cents, with estimates ranging from a low of 30 cents to a high of 36 cents, according to FactSet Research.

Related:BJ’s Wholesale Club launches IPO

“We’re pleased with our third-quarter performance, which exceeded our expectations for sales and earnings,” Baldwin said. “We continue to execute against our strategic priorities and have now delivered 11 consecutive quarters of improved profitability and five quarters of positive comp sales. We are still in the very early stages of our transformation and have significant opportunities ahead. We are optimistic our approach will deliver benefits to our members, shareholders and team members over the long term.”

In a research note late Tuesday, Jefferies analyst Christopher Mandeville noted that BJ’s strong third-quarter results are a sign that the company is turning itself around following its initial public offering this past summer.

“We're encouraged by the strong acceleration in the general merchandise two-year stack comp, and the updated guidance suggests continued momentum for 4Q,” he wrote. “We believe BJ’s has executed well since its IPO and has a long runway to grow membership fee income, improve comps and bolster profitability.”

On the cost side, BJ’s is working to fine-tune product assortment in specific categories, such as baby care and health and beauty aids, as well as sharpen cost procurement in perishables, according to Mandeville. He said the company aims to reinvest back into merchandising and marketing to help uphold a price gap discipline of 10% to 15% with mass merchants and 25% with grocers.

“Management continues to revamp its omnichannel offering with a focus on acquiring members — mainly younger, with notably larger baskets — via digital channels. Through 3Q 2018, BJ’s has more than doubled the number of members acquired digitally versus the same period a year ago,” he added. “Management signaled that it has also made progress in re-engaging lapsed members with recent open-house events and trial memberships and expects to report record-high membership/renewal rates on its 4Q 2018 call. Instacart continues to be an opportunistic partnership for BJ’s, especially in terms of engaging with non-members.”

BJ’s has raised its earnings guidance for the full 2018 fiscal year. The retailer now projects GAAP earnings per share of 89 cents to 94 cents, compared with 83 cents to 91 cents previously. Adjusted EPS is pegged at $1.22 to $1.26, up from the prior guidance of $1.17 to $1.24.

Analysts’ consensus forecast is for adjusted EPS of $1.22, with projections running from a low of $1.06 to a high of $1.25, according to FactSet Research.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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