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BJs_Wholesale_Club_store_Staten_Island_-_Copy.jpg BJ's Wholesale Club
Grocery led the way in the quarter with a 33% jump in comparable sales, BJ's reported.

Sales at BJ’s Wholesale surge over 20% in first quarter

Earnings double Wall Street’s consensus per-share estimate

BJ’s Wholesale Club has “gained considerable share” after net and comparable sales jumped more than 20% and net income more than doubled in the fiscal 2020 first quarter, President and CEO Lee Delaney said.

For the quarter ended May 2, net sales totaled $3.72 billion, up 21.1% from $3.07 billion a year earlier, BJ’s reported Thursday. Membership fee income also rose 8.4% to $79.6 million, powered by a 40% year-over-year gain in members. Overall revenue for the Westborough, Mass.-based company was 20.8% to nearly $3.8 billion for the period.

Comparable-club sales climbed 19.9% from a year ago and, excluding fuel, were up 27%.

“This pandemic has presented us all with challenges. I am proud of how we managed our business in this new environment and deeply thankful for the contributions of our club and distribution center team members, who have tirelessly served a surge in demand for essential products while embracing new safety conditions and protocols,” Delaney told financial analysts in a conference call on Thursday.

“Grocery goods, which represent roughly 85% of our merchandise sales, were in extremely high demand starting in late February and continuing throughout the quarter. Consumers consolidated their trips and bought bigger baskets to satisfy increased consumption-at-home needs,” he explained. “And while needs shifted throughout the quarter from cleaning supplies to pantry loading to perishables, we offered a one-stop destination with industry-leading value from the large sizes consumers need to stock up. These trends were relatively consistent in shape and magnitude across all our geographies. As a result, we believe we have gained considerable share in every region across most categories in which we compete.”

BJ's Wholesale ClubBJs_supplies_donation-first_responders-coronavirus.jpg

During the pandemic, BJ's has provided special shopping hours to first responders as well as donated essential supplies.

Delaney noted that the BJ’s team “responded with extraordinary agility” to escalating demand in the quarter with the help of recently enhanced forecasting capabilities.

“Late in February, we were able to identify demand signals utilizing our new demand and fulfillment software to quickly and significantly bolster order flow and keep up with the surge in demand,” he said. “Our merchants did an excellent job of working with existing suppliers as well as expanding our sources of supply from new vendors, including those that service the restaurant industry. Our logistics and distribution teams worked around the clock to keep the goods flowing. Our frontline employees worked tirelessly to keep the shelves stocked and members happy.”

BJ’s also saw “unprecedented levels of demand for digital shopping” during the first quarter, according to Delaney. The company reported that “digitally enabled” sales swelled 350% for the period. BJ’s offers its own buy-online-pickup-in-club (BOPIC) service and partners with Instacart for same-day home delivery.

“Digitally enabled sales grew by more than threefold this quarter and represented 5% of our merchandising comp sales for the quarter, compared to 3% in the fourth quarter and 1.5% in last year's first quarter,” he said. “We believe we have a structural cost advantage as we continue to grow these businesses, especially in our same-day delivery business, which was up more than eightfold over last year’s first quarter. We plan to continue to improve upon our existing capabilities and launch new offerings to delight our members and increase the value of their membership.

“In the first quarter, we began testing curbside pickup and BOPIC for perishables in select clubs,” he added.

Going forward, BJ’s will report category results as two divisions: grocery (perishables and edible/nonedible groceries) and general merchandise/services, Chief Financial and Administrative Officer Robert Eddy told analysts in the call. During the first quarter, merchandise comp sales accelerated by low teens in the fourth week of February and then leaped over 40% in March, followed by 23% growth in April, driven by continued demand and increased EBT and stimulus payments, he said.

Grocery led the way in the quarter with a 33% jump in comp sales. “Perishables, edible grocery and nonedible grocery, all saw comp sales north of 30%. We saw very strong growth rates in all the categories you would expect — paper products, cleaning essentials, fresh meat, frozen, dairy, fresh produce, packaged goods and beverages,” Eddy explained. “Overall, we feel great about our position in the grocery business as we exit the quarter. Our general merchandise and services divisions saw declines of approximately 3%, as sales of apparel decreased and we turned off our services businesses. Our apparel business drove the bulk of that decline. We saw healthy growth in other categories, including TVs and other consumer electronics, small appliances and recreational.”

BJ's Wholesale ClubBJs_Wholesale_Club-Pensacola_FL-grocery.jpg

In early March, BJ's opened a new club in Pensacola, Fla., on the former site of a Sears store.

First-quarter operating income increased to $143.8 million, or 3.8% of total revenue, from $70.7 million, or 2.2% of total revenue, a year ago.

On the earnings side, BJ’s posted net income of $95.7 million, or 69 cents per diluted share, compared with $35.8 billion, or 25 cents per diluted share, in the prior-year period. Adjusted net earnings for the 2020 quarter also were $95.7 million, or 69 cents per diluted share, versus $36.7 million, 36 cents per diluted share, a year earlier.

Analysts, on average, had projected adjusted earnings per share (EPS) of 34 cents, with estimates ranging from a low of 26 cents to a high of 52 cents, according to Refinitiv/Thomson Reuters.

Gross profit increased 28.3% in the quarter, though the merchandise gross margin rate (excluding fuel and membership fee income) decreased 30 basis points. BJ’s said the latter benefited from strong sales and category profitability initiatives but was offset by distribution costs from the COVID-19 crisis, a decline in higher-margin apparel sales and the temporary shutdown of the higher-margin services business. A 17.8% gain in selling, general and administrative expenses (SG&A) expense reflected costs related to the pandemic, including wage hikes, bonuses, safety and protective equipment, and other operational costs, such as security, according to the company.

So far this fiscal year, BJ’s has opened one new club in Pensacola, Fla., and it plans to open another in Chesterfield, Mich., this summer.

“The Chesterfield opening was delayed as a result of COVID-19-related construction bans,” Delaney said. “We expect similar delays to impact our prior club expansion goals for the year but hope increasing availability of good real estate will open more opportunity in 2021 and beyond.”

BJ’s finished the first quarter with 218 clubs and 146 BJ’s Gas locations in 17 states.

“As a leading large-format club store with regional scale in the Northeast and a grocery offering of unbeatable value, strong private-label brands, robust digital capabilities and an efficient store model, we’re more relevant to shoppers consolidating trips than ever before,” said Delaney. “And while we would like nothing more than for public health fears to subside quickly, we expect the potentially recessionary impacts in the broader economy to drive increased demand for discount grocery options. We talked to you in the past about growing membership and engaging our members in digital capabilities. The current environment has accelerated these efforts, positioning us to leverage this unique opportunity to set the foundation for a multiyear profitable expansion of the business.”

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