Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Salad Days at BJ's

Seeing how the housing market crash and credit market crisis have affected retailers in their latest quarterly results leaves investors wondering where all the shoppers have gone. Wednesday morning, however, there was evidence that shoppers are still dishing out their hard-earned cash to one retailer.

Not surprisingly, many belt-tightening consumers were gathering at warehouse club BJ's (NYSE: BJ  ) , where buying in bulk provides attractive deals for shoppers stretched for cash.

After Wal-Mart (NYSE: WMT  ) reported same-store sales that grew 3.1% (excluding fuel) last quarter at Sam's Club, and Costco (Nasdaq: COST  ) weighed in with 7% growth, BJ's reported 5.4% growth.

While total sales inched up only 1.9%, BJ's results were stacked up against an extra 14th week in 2006. Still, the company's earnings per share rose 38%, to $0.80, from last year, beating analysts' expectations by $0.06. Last year's earnings exclude $0.40 of unusual items and include the extra week and the one-time costs of closing two ProFoods restaurant supply operations.

Management credited improved merchandise margins for the tasty quarter. BJ's focused on inventory management last year, so inventory rose just 3% for the quarter, leading to lighter fourth-quarter markdowns compared with the previous year. Improved gasoline profits also led to the earnings increase.

Should Foolish investors consider taking advantage of salad days for the warehouse clubs? Sporting P/E ratios in the mid-20s, neither Costco nor BJ's looks like a value play. Fellow Fool Anders Bylund recently noted that Costco looks fairly priced.

BJ's has been making a decent run of late after looking like a mess last year, but it still looks like more of a wild card, in my view. The company has a loyal customer base in its Northeast stronghold, but has had a tough time making the grade in the rest of the U.S. against its larger and better-capitalized competitors. As a turnaround play, BJ's is worth a closer look, but I think Foolish investors who believe in the warehouse club business should stick with Costco as the best in breed.

For related Foolishness:

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 591863, ~/Articles/ArticleHandler.aspx, 10/21/2016 8:15:26 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
BJ.DL $0.00 Down +0.00 +0.00%
BJ's Wholesale Clu… CAPS Rating: ****
COST $148.97 Down -1.07 -0.71%
Costco Wholesale CAPS Rating: ****
WMT $68.34 Down -0.39 -0.57%
Wal-Mart Stores CAPS Rating: ***