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NATICK, Mass. - Double digits gains in food sales were partly responsible for a 25 percent jump in net income for BJ's Wholesale Club, Inc., in its second quarter ended July 31. Net income totaled $28 million, or 40 cents per diluted share, including a post-tax charge of $3.6 million, or five cents per diluted share, to establish a reserve for claims by credit card-issuing banks and post-tax income of approximately $3 million, or four cents per diluted share, representing BJ's recovery of claims against bankrupt home furnishing retailer House2Home.
Net income for the first half of 2004 was $44.1 million, or 63 cents per diluted share, an increase of 31 percent compared with the same period in 2003. For the first half of 2003, the company reported income before the cumulative effect of accounting changes of $34.5 million, or 50 cents per diluted share, and net income of $33.2 million, or 48 cents per diluted share. Last year's results included a post-tax gain of $1.1 million, or approximately two cents per diluted share, as a result of reducing the company's reserves for House2Home lease obligations.
Net sales for the second quarter went up 12.5 percent to $1.8 billion, compared with $1.6 billion in the second quarter of last year. Comparable-club sales for the quarter grew 8.5 percent, including a contribution from gas sales of about 2.3 percent. These results reflected solid sales of fresh food, health and beauty aids, paper products, household chemicals, and gasoline, partially offset by a decrease in air conditioner and fan sales, because of cooler weather in the Northeast as opposed to last year.
BJ's president and c.e.o. Mike Wedge said in a statement: "We attribute our strong sales results for the second quarter primarily to Member Insight-driven improvements in merchandise assortment and adjacencies that were made during the first quarter and early second quarter. We were particularly pleased with the [12 percent] growth in food sales."
In a conference call yesterday, Wedge reflected on the company's success during the quarter, noting: "We recorded double-digit comp increases in new memberships and had the highest record of trial conversions to paid memberships in BJ's history -- an outstanding accomplishment by our clubs and general managers." He also hailed the recent hiring of Karen Stout as the company's as e.v.p. of merchandising, citing her 25 years of experience in the retail grocery business.
Additionally, Wedge spoke about a concept BJ's planned to test this fall: the launch of Pro Foods Restaurant Supply, two metro New York-area clubs "exclusively for the foodservice businesses." He said that the clubs, a 56,000-square-foot facility in the Bronx and an approximately 68,000-square-foot space in Long Island City, would target foodservice or restaurant businesses with one to four locations. Explaining that the concept would have its own buyers and operators, and function as a separate organization within the company, Wedge said, "Our goal is to exploit an adjacent market that allows us to utilize our expertise with small businesses without cannibalizing sales from BJ's Clubs," which "will continue to focus on the individual consumer."
Summing up the company's overall quarterly performance, Wedge said: "The BJ's team continues to execute our new strategic plan in an outstanding manner. Our core business is strong, our positioning in the market unique, and our move to a truly member-centric company will help us drive sales in an intelligent chain expansion."
BJ's currently runs 151 clubs and 79 gas stations, compared with 144 clubs and 74 gas stations last year.