BJ's Beats Guidance on Q4 Income; Plans Systems Overhaul
BJ's Wholesale Club, Inc. yesterday posted net income of $50.2 million, or 80 cents per diluted share, for the fourth quarter of 2007 ended Feb. 2, surpassing the company's guidance of 70 cents to 74 cents per share given in January.
The Natick, Mass.-based warehouse club chain attributed the income rise to solid January sales, good merchandise margin rates, strong gasoline profitability, and expenses coming in slightly lower than projected.
For the 52 weeks ended Feb. 2, net income was a $122.9 million or $1.90 per share, the company said.
Meanwhile, the retailer said during a conference call yesterday that it plans a "comprehensive review of all [its] systems," in the words of e.v.p. Frank Forward.
For the third quarter of 2006, the retailer reported net income of $11.9 million, or 18 cents per share. These results included unusual income and expense items resulting in a net expense of 40 cents per share. For the full year 2006, net income was $72.0 million, or $1.08 per share.
On a per-share basis, these results included unusual income and expense items resulting in a net expense of 42 cents per share. The unusual items in both cases included closing costs for BJ's ProFoods restaurant supply operations, and pharmacy closing costs.
Sales for the fourth quarter of 2007, which included 13 weeks of sales vs. 14 weeks of sales in 2006, grew 1.9 percent to $2.4 billion. Comparable-club sales for the fourth quarter, based on 13 weeks of sales in both years, increased 5.4 percent, including a favorable impact from gasoline sales of 2.4 percent, and an adverse effect from the absence of pharmacy sales of 0.4 percent. On a comparable-club basis, merchandise sales excluding gas and pharmacy, rose 3.4 percent.
Sales for 2007, which included 52 weeks vs. 53 weeks in 2006, increased 6.2 percent to $8.8 billion. Comparable-club sales for 2007, which included 52 weeks in both years, grew 3.7 percent, including a favorable impact from gas sales of 1.1 percent, and a negative impact from the lack of pharmacy sales of 0.4 percent. On a comparable-club basis, merchandise sales excluding gas and pharmacy, went up 3.0 percent.
"Our 7 percent comp-club sales growth in food reflected continued strength in perishables, which rose from approximately 8.4 percent, following an 8.3 percent rise in Q3, a 7.8 percent rise in Q2, and a 3.2 percent increase in Q1," said BJ's c.e.o., Herb Zarkin, during yesterday's conference call. "Throughout the year, the main driver[s] of our perishable businesses were fresh produce, fresh meat, [and] prepared foods, as well as frozen foods and dairy items."
Zarkin added that the company planned to open four new clubs in 2008, all in existing markets, with rollouts weighted toward the second half of the year. The retailer will also renovate four clubs to bring them in line with its current prototype, and continue to upgrade its perishable departments with such features as multideck refrigeration cases, which Zarkin characterized as "more attractive and easier to shop than the traditional coffin cases."
"Our decision to moderate chain expansion in 2007 and 2008 gave us some space to access our business model, and to do whatever was necessary to get our sales trend back on track," explained Zarkin. "Starting in 2009, we plan to reaccelerate the pace of new club openings, so we are very focused on building up a pipeline this year, so that we can open seven to nine clubs next year and another seven to nine clubs in 2010, for opportunities within our core markets, where we can leverage our brand equity in our cross-dock distribution system."
He also noted the chain's success in selling organic/natural foods and private label items.
On the subject of the systems review, Forward said, "While we have always had excellent systems in merchandising and logistics, some of our other systems such as sales reporting, financial, and membership systems have begun to show their age.... As a result we decided to undertake a large scale project that will take five to six years to complete, at a cost of about $20 to $30 million per year in incremental capital and a fairly significant amount of SG&A expense."
BJ's c.i.o. John Polizzi and his information technology division will head the project. Said Forward: "We believe [the initiative] is necessary for us to run our business in the future. It will allow us to take advantage of the more forward-thinking aspects of marketing, merchandising, and operations, as well as providing easier and more comprehensive access to the information we need to be as efficient and effective as we can in a very competitive retail world."
In other BJ's financial news, the company reported that February 2008 sales increased 9.0 percent to $655.7 million from $601.8 million in February 2007. Comparable-club sales grew 5.9 percent in February 2008, including a contribution from sales of gas of 2.7 percent. In the year-ago period the retailer reported a comparable-club sales increase of 3.0 percent, including a positive impact from gas sales of 0.9 percent and a negative impact from the absence of pharmacy sales of 0.4 percent.
Food sales grew about 7 percent for the month, while general merchandise sales dove about 2 percent, according to BJ's. Departments with the strongest sales increases over last year included juices, frozen foods, HBC, meat, paper, pet foods, prepared foods, produce, snacks, televisions, and toys. Among the weaker departments vs. last year were apparel, cigarettes, furniture, prerecorded video, storage, tires, and wine.
BJ's operates 177 BJ's Wholesale Clubs in 16 states.
The Natick, Mass.-based warehouse club chain attributed the income rise to solid January sales, good merchandise margin rates, strong gasoline profitability, and expenses coming in slightly lower than projected.
For the 52 weeks ended Feb. 2, net income was a $122.9 million or $1.90 per share, the company said.
Meanwhile, the retailer said during a conference call yesterday that it plans a "comprehensive review of all [its] systems," in the words of e.v.p. Frank Forward.
For the third quarter of 2006, the retailer reported net income of $11.9 million, or 18 cents per share. These results included unusual income and expense items resulting in a net expense of 40 cents per share. For the full year 2006, net income was $72.0 million, or $1.08 per share.
On a per-share basis, these results included unusual income and expense items resulting in a net expense of 42 cents per share. The unusual items in both cases included closing costs for BJ's ProFoods restaurant supply operations, and pharmacy closing costs.
Sales for the fourth quarter of 2007, which included 13 weeks of sales vs. 14 weeks of sales in 2006, grew 1.9 percent to $2.4 billion. Comparable-club sales for the fourth quarter, based on 13 weeks of sales in both years, increased 5.4 percent, including a favorable impact from gasoline sales of 2.4 percent, and an adverse effect from the absence of pharmacy sales of 0.4 percent. On a comparable-club basis, merchandise sales excluding gas and pharmacy, rose 3.4 percent.
Sales for 2007, which included 52 weeks vs. 53 weeks in 2006, increased 6.2 percent to $8.8 billion. Comparable-club sales for 2007, which included 52 weeks in both years, grew 3.7 percent, including a favorable impact from gas sales of 1.1 percent, and a negative impact from the lack of pharmacy sales of 0.4 percent. On a comparable-club basis, merchandise sales excluding gas and pharmacy, went up 3.0 percent.
"Our 7 percent comp-club sales growth in food reflected continued strength in perishables, which rose from approximately 8.4 percent, following an 8.3 percent rise in Q3, a 7.8 percent rise in Q2, and a 3.2 percent increase in Q1," said BJ's c.e.o., Herb Zarkin, during yesterday's conference call. "Throughout the year, the main driver[s] of our perishable businesses were fresh produce, fresh meat, [and] prepared foods, as well as frozen foods and dairy items."
Zarkin added that the company planned to open four new clubs in 2008, all in existing markets, with rollouts weighted toward the second half of the year. The retailer will also renovate four clubs to bring them in line with its current prototype, and continue to upgrade its perishable departments with such features as multideck refrigeration cases, which Zarkin characterized as "more attractive and easier to shop than the traditional coffin cases."
"Our decision to moderate chain expansion in 2007 and 2008 gave us some space to access our business model, and to do whatever was necessary to get our sales trend back on track," explained Zarkin. "Starting in 2009, we plan to reaccelerate the pace of new club openings, so we are very focused on building up a pipeline this year, so that we can open seven to nine clubs next year and another seven to nine clubs in 2010, for opportunities within our core markets, where we can leverage our brand equity in our cross-dock distribution system."
He also noted the chain's success in selling organic/natural foods and private label items.
On the subject of the systems review, Forward said, "While we have always had excellent systems in merchandising and logistics, some of our other systems such as sales reporting, financial, and membership systems have begun to show their age.... As a result we decided to undertake a large scale project that will take five to six years to complete, at a cost of about $20 to $30 million per year in incremental capital and a fairly significant amount of SG&A expense."
BJ's c.i.o. John Polizzi and his information technology division will head the project. Said Forward: "We believe [the initiative] is necessary for us to run our business in the future. It will allow us to take advantage of the more forward-thinking aspects of marketing, merchandising, and operations, as well as providing easier and more comprehensive access to the information we need to be as efficient and effective as we can in a very competitive retail world."
In other BJ's financial news, the company reported that February 2008 sales increased 9.0 percent to $655.7 million from $601.8 million in February 2007. Comparable-club sales grew 5.9 percent in February 2008, including a contribution from sales of gas of 2.7 percent. In the year-ago period the retailer reported a comparable-club sales increase of 3.0 percent, including a positive impact from gas sales of 0.9 percent and a negative impact from the absence of pharmacy sales of 0.4 percent.
Food sales grew about 7 percent for the month, while general merchandise sales dove about 2 percent, according to BJ's. Departments with the strongest sales increases over last year included juices, frozen foods, HBC, meat, paper, pet foods, prepared foods, produce, snacks, televisions, and toys. Among the weaker departments vs. last year were apparel, cigarettes, furniture, prerecorded video, storage, tires, and wine.
BJ's operates 177 BJ's Wholesale Clubs in 16 states.