BJ's Wholesale Club Inc. said Wednesday that its fiscal fourth-quarter profit climbed 5 percent and higher gasoline prices led to increased revenue.
But the third-largest warehouse club operator also gave a 2010 earnings forecast below analysts' predictions as it faces intense price competition and shoppers' focus on necessities, which carry lower profit margins. Shares fell $1.43 per share, or almost 4 percent, to $35.04 in late morning trading.
BJ's profit increased to $55.1 million, or $1.01 per share. That compares with earnings of $52.7 million, or 91 cents per share, a year ago.
Excluding 6 cents per share in legal charges, earnings were 95 cents per share. Wall Street expected slightly higher results, pegging profit at 96 cents per share. These estimates generally remove one-time items.
Sales for the period ended Jan. 30 rose 9 percent to $2.8 billion from $2.56 billion on membership fee growth and increased net sales, beating the $2.79 billion forecast of analysts polled by Thomson Reuters.
Sales at stores open at least a year grew 4.6 percent, with a 2.3 percent benefit from gasoline sales. That figure is a key measure of a retailer's performance because it looks at the results of existing stores rather than newly opened ones.
The results are an improvement from the third quarter, when the sales figure fell 2.5 percent.
Earlier in the morning rival Costco Wholesale Corp. reported that its second-quarter profit rose 25 percent as strong overseas sales growth and increased gasoline prices lifted its revenue.
BJ's, based in Natick, Mass., has seen success during the recession as budget-minded shoppers have come to its stores for deals on food and other necessities, but shoppers are still shying away from nonessentials as they grapple with high unemployment and tight credit. Sales of food increased about 7 percent while general merchandise sales declined by about 1 percent during the fourth quarter.
"In terms of discretionary (items), it is creeping along, but I don't see any major turnaround," said Laura Sen, president and CEO of BJ's in an address to investors during a conference call.
The company, like other rivals, has also battled price deflation, particularly in perishables. Sen also noted BJ's also faces stiff price competition from Wal-Mart Stores Inc. and grocery retailers on such key items as milk, eggs and televisions.
BJ's expects food and other basic items to drive sales this year and is stepping up remodeling of its stores as well as adding new units to existing markets. As part of its real estate strategy, it's experimenting with a smaller format store — late last year it opened a, 85,000-square-foot store in Quakertown, Pa., and will be opening another similar size unit in Quincy, Ma.
BJ's, which said it saw increases in paid memberships as well as an increase in spending by new members last year, said it will focus on adding members. The company enjoyed a 20 percent increase in the number of customers who signed up for its Rewards membership, its premium membership program.
The company's full-year profit slipped 2 percent to $132.1 million, or $2.42 per share, from $134.6 million, or $2.28 per share, in the prior year. Adjusted earnings were $2.48 per share.
Annual revenue increased 2 percent to $10.19 billion.
Sales at stores open at least a year fell 1.9 percent, with a 5.9 percent drag from lower overall gas prices. Taking out gas sales, the figure climbed 4 percent for the year.
BJ's forecast a profit between $2.54 and $2.64 for fiscal 2010, but that's short of the $2.71 per share that analysts are looking for. The company anticipates first-quarter earnings in a range of 40 cents to 45 cents per share. Wall Street predicts a quarterly profit of 43 cents per share.
BJ's runs 187 wholesale clubs in 15 states.
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