Wednesday, Warehouse club operator BJ's Wholesale Club, Inc. (BJ) reported an increase in profit for the third quarter, mainly driven by unusually strong gasoline sales and profits. Double-digit growth in net sales and comparable club sales helped top line grow 13.4% and beat market projections. Further, the company lifted its fiscal 2008 earnings forecast, and provided a fiscal 2009 earnings view.
BJ's Wholesale Club's peer, Costco Wholesale Corp. (COST), the world's largest membership warehouse club chain based on sales volume, in early October reported a 6.8% rise in profit for the fourth quarter to $397.83 million, driven by a 9% rise in comparable store sales.
Natick, Massachusetts-based BJ's Wholesale's third-quarter net income grew to $28.24 million from $22.70 million in the previous year. On a per-share basis, earnings climbed 37% to $0.48 from last year's $0.35 on lower share count.
The latest quarter results included loss from discontinued operations of $776 thousand or $0.01 per share, compared to a loss of $197 thousand in the previous year.
On a continuing operations basis, income increased to $29.02 million or $0.49 per share from $22.89 million or $0.35 per share a year earlier. The company noted that the results for the third quarter of 2008 included post-tax expense of $0.5 million, or $0.01 per share, related to the closing of its Greenville, South Carolina club.
On average, 15 analysts surveyed by First Call/Thomson financial expected the company to earn $0.46 per share for the quarter. Analysts' estimates typically exclude special items.
BJ's Wholesale internally was looking for third-quarter earnings of $0.45 to $0.49 per share.
According to the company, latest quarter results reflected a number of unplanned income and expense items that resulted in a net benefit of about $0.10 per share. The company noted that gasoline income for the quarter exceeded plan by approximately $0.17 per share, due primarily to unprecedented market conditions resulting in unusually strong gasoline sales and profits. However, this benefit was partly offset by about $0.04 per share in expenses related to severance costs and an adjustment to the company's reserve for state sales tax audits, together with about $0.03 per share in expenses for higher than planned bonus accruals.
Total third-quarter revenues went up to $2.46 billion from $2.17 billion in the prior-year quarter, beating analysts' consensus estimate of $2.45 billion.
Third-quarter net sales, as reported in early November, increased 13.4% to $2.40 billion from $2.12 billion a year ago. Revenues from membership fees edged up to $44.51 million from $44.32 million last year, and other revenues grew to $11.78 million from prior year's $11.04 million.
Comparable club sales for the third quarter, as reported previously, increased 11.9%, compared to an increase of 3.4% in the year-ago quarter. Merchandise comparable club sales increased 6.6% in the third quarter. The company previously had noted that the third-quarter 2008 comparable sales included contribution of gasoline sales of 5.3% compared to a negative impact from gasoline sales of 0.2% and absence of pharmacy sales worth 0.4% in the same period.
In the preceding quarter, BJ's Wholesale had reported net income of $36.49 million or $0.61 per share, and income from continuing operations of $36.6 million or $0.61 per share. Total revenues were $2.7 billion with net sales of $2.65 billion and a comparable club sales growth of 15.5%.
During the third quarter, the company, which currently operates 177 clubs in 15 states, bought back 0.7 million shares at an average cost of $35.14 per share, or about $25.9 million in aggregate. At the end of the quarter, the company had approximately $266 million remaining under its buyback authorization.
For the first nine months, net income increased to $81.92 million or $1.38 per share from $72.62 million or $1.11 per share last year. Income from continuing operations was $83.01 million or $1.40 per share, higher than $70.68 million or $1.08 per share recorded a year earlier.
Total nine-month revenues grew to $7.47 billion from prior year's $6.54 billion, and net sales increased 14.7% to $7.30 billion from $6.37 billion in the previous year. The company's comparable club sales increased 12.3%, comprising merchandise comparable club sales growth of 6.5% and impact of gasoline sales of 5.8%.
As of November 1, 2008, the company's cash and cash equivalents were $52.83 million, lower than $116.73 million as of November 3, 2007.
Further, updating the forecast for the fiscal year ending January 30, 2009, BJ's Wholesale said it now expects net income in a range of $131 million to $135 million, or $2.20 to $2.30 per share, compared to the previous guidance of $124 million to $130 million, or $2.10 to $2.20 per share. Analysts are expecting earnings of $2.21 per share for the year, with expectations ranging between $2.09 and $2.28 per share.
In a November 3 research note, brokerage Credit Suisse lifted its earnings estimate for BJ's Wholesale Club to $2.28 per share from earlier estimate of $2.10 per share.
Furthermore, for the fiscal year ending January 30, 2010, the company expects net income in the range of $129 million to $136 million, or $2.27 to $2.39 per share. The Street estimates earnings of $2.30 per share, with a range of $1.70 and $2.46 per share.
BJ closed Tuesday's regular trading session at $33.57, down $0.40, on a volume of 2.8 million shares. In the past 52 weeks, shares have been trading in a range of $26.36 - $44.29.
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