BJ's Delivers Healthy Sales

BJ’s Wholesale Club Inc. ( ( ) ), a leading warehouse club operator in the United States, recently posted healthy sales results for the four-week period ended July 30, 2011.

After registering a jump of 7.3% in June 2011, BJ’s experienced comparable club sales growth of 9.2% in July. Rising gasoline prices aided comparable club sales by 3.8% during the four-week period. The reported month’s comparable club sales growth fared better than 2.8% increase registered in the prior-year period.

For the 26-week period ended July 30, 2011, comparable club sales climbed 7.1%, including a 4% contribution from gasoline sales. For the second-quarter 2011, comparable club sales rose 7.8%, including a 4% contribution from gasoline sales.

Comparable club sales increased in all the four weeks. The third week saw robust growth. Excluding gasoline sales, the company’s merchandise comparable club sales for July climbed 5.4% compared with an increase of 1.9% in the same month last year.

During the twenty-six week period, merchandise comparable club sales rose 3.1%. For the second-quarter 2011, merchandise comparable club sales jumped by 3.8%.

Sales in July jumped 12.4% to $854.8 million from $760.9 million in the same month in the prior-year. During the twenty-six week period, net sales rose 10.5% to $5,754 million from $5,205.4 million. Second quarter sales climbed 11% to $2,984.7 million.

Excluding gasoline sales, the average transaction amount rose by approximately 4%, whereas traffic grew by 1%.

Heavy job losses and the recent economic downturn have changed the way consumers used to shop. BJ’s hinted that food sales grew 7% for July, contributing significantly to the growth in comparable club sales. Sales of general merchandise grew 3%. For the second quarter, food sales jumped by about 5% and general merchandise sales rose approximately 1%.

By categories –– air conditioners, coffee, computer equipment, dairy, deli, household chemicals, ice cream, meat, men’s apparel, lawn & garden, milk, prepared foods, produce, salty snacks, seasonal and small appliances reported robust sales. On the other side, books, diapers, pre-recorded video and televisions delivered sluggish sales.

BJ’s, which faces stiff competition from Costco Wholesale Corporation ( ( COST - Analyst Report ) ), currently operates 190 warehouse clubs in 15 states.

BJ’s Wholesale will sustain its investments in Club payroll and Club remodels to augment the sales of perishable items, which have been the driving factors, and have helped increase sales and gain market share. However, we believe that sluggish economic recovery and a weak consumer spending environment could intensify competition, as supermarket stores and other warehouse club operators could offer compelling prices to lure consumers.

Currently, we have a long-term Neutral recommendation on the stock. Moreover, BJ’s Wholesale holds a Zacks #2 Rank, which translates into a short-term Buy rating.