BJ's Wholesale Club (NYSE: BJ), the largest warehouse club chain in the East, reported better-than-expected first-quarter results that could point to a positive trend in food and gas pricing.
Sales for the period jumped 12.1% and comparable-store sales were up 6.6% as a result of the company's effort to offer bigger ticket items that produce higher margins. The company earned $0.23 per share in the first quarter, topping last year's $0.16 and this year's consensus estimate of $0.22.
BJ's was also pleasantly surprised to receive a contribution from gas sales, which is usually a break-even item at best. The company, and rival Costco (Nasdaq: COST), should continue to benefit from rising gas prices; these companies offer a significant discount on retail gas prices, and consumers should continue to respond. I know that I drive an extra 10 minutes to fill up at my local Costco because I save at least 10 cents a gallon.
Additionally, warehouse clubs such as BJ's, Costco, and Wal-Mart's (NYSE: WMT) Sam's Club, will continue to use their critical mass and buying power to be able to price rising food items more effectively than grocery chains such as Safeway (NYSE: SWY), Albertson's (NYSE: ABS), Kroger (NYSE: KR), Ahold (NYSE: AHO), and Winn-Dixie (NYSE: WIN).
However, pricing isn't everything in the food game. Buying in bulk can put a strain on a family's ability to consume a huge amount of product before the expiration date on the sides of the carton. The warehouse companies and the traditional retailers have their niches, and both are adept at leaning on their relative competitive advantages.
I expect the positive trend for warehouse clubs like BJ's and Costco to continue. With gas prices rising almost every time I go to the pump, people might join these clubs so they can save money. Just think about it, people could recoup the $30 to $45 sign-up fee easily with the savings that they would reap by filling up their gas tanks at these outlets over the summer. This could translate into a new customer bonanza for the warehouse clubs and create quite a positive impact on the shares of these companies.
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Fool contributor Phil Wohl spent over 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.
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