There's nothing like well-timed chatter about a buyout to keep an otherwise mediocre story afloat.
I speak here of BJ's Wholesale Club (NYSE:BJ) and the apparent disconnect between a still-floundering store and a reasonably solid recent stock performance.
In plenty of respects, this quarter was worse than the one before it. Revenue was up just 5%, comp-store sales were up just 1.7%, and gasoline sales contributed more than half of that. In fact, look at the underlying trends and you see traffic (ex-gasoline) down 3% and the average ticket up 4%. Clearly, that can't go on forever, unless the company hopes to have a thousand shoppers spending about $2 million apiece each quarter.
It's also a bit discouraging to see that some underlying trends haven't changed much -- namely that food is doing all right (up 4%) and merchandise isn't (down 3%). On a slightly more positive note, though, private label brands are continuing to grow as a percentage of total sales, and that's good for margins.
I can't say that I'm terribly impressed with management's grand plan to boost traffic. OK, adding better merchandise (like higher thread-count sheets) is nice, but that's not the answer. Likewise, the company's efforts to stimulate foot traffic through advertising aren't likely to make a lasting difference.
Want to know what I think BJ's should do? Try cleaning the stores -- shopping at my local BJ's (and I've been to all three near me) is like stepping into a dungeon compared with the local Costco (NASDAQ:COST). And on the subject of cleanliness, I wasn't thrilled to see a mouse at my store a few weeks ago. But I was even less thrilled that the clerk I mentioned this to tried to convince me that it was a sparrow (here's a clue, guys -- sparrows don't have four legs or tails). It also wouldn't hurt the company to look into improving its in-stock position -- coupons and promotions are nice and all, but not when you go the store and find none of the goods for which you're holding coupons.
The goods news here for the stock is that BJ's has attracted a lot of attention as a potential buyout. Maybe Costco would like to kick-start its expansion. Maybe a foreign retailer like Loblaw or Tesco would like to build a beachhead in America. Or maybe it's possible that somebody will come into the picture a la Sears (NASDAQ:SHLD) and save the day. Whatever the case may be, let's hope something changes. After all, foot traffic really tells the tale on most retailers.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
