BJ's Wholesale Club
Following the trivia release, BJ's issued solid third-quarter earnings. Total sales for the third quarter increased 8%, with comparable-store sales up 3.4%. Operating income rose 21%, and earnings per share leapt 25% to $0.35, topping analyst estimates by $0.02.
Behind the numbers
Foolish investors shouldn't be surprised by the earnings "beat," since BJ's made some noise with its September sales release. Still, there's meat behind the third-quarter numbers that sheds light on the company's operations.
With warehouse clubs like Costco
I like BJ's inventory position going into the holidays, essentially flat with last year, and down 2% per warehouse. With other retailers like Kohl's
I'm also impressed with the gains the company is making in fresh food sales. While warehouse clubs pay the rent on consumables, fresh food is an add-on sale that also benefits margins. BJ's is taking its fresh offerings seriously and gaining share.
But don't let the 25% quarterly EPS gain make you overly giddy. A big piece of the increase came from lower pre-opening expenses, which were slashed by 72%. This savings results from slower new store growth, which will be a brake on sales gains in future years.
All in all, I think BJ's is a stronger retail competitor with a slower growth rate. It is focused on operational improvements, trying to catch up to bigger rivals Costco and Sam's in sales volume per warehouse. I've thought that was the right strategy for quite a while for this company. While I continue to recommend Costco as the clear leader in the warehouse club business, BJ's seems like it's on the right track -- and having some fun along the way.
Which warehouse club stock is right for you?
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Fool contributor Timothy M. Otte surveys the retail scene from Dallas. He welcomes comments on his articles. Tim owns shares of Wal-Mart and Costco, but none of the other companies mentioned in this article. The Fool has a disclosure policy.