BJ's Wholesale Club Launches Cost Reduction Plan

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BJ's Wholesale Club Launches Cost Reduction Plan

By Gina Acosta - 03/05/2020
BJ's Wholesale Club Launches Cost Reduction Plan
BJ's plans to expand its natural and organic product assortment in 2020

If ever there was a time to be optimistic about the financial prospects of bulk retailers, it's now -- a time when Americans are panic-buying bulk-size packages of toilet paper and hand sanitizer.

On March 5, one of those bulk grocery retailers, BJ's Wholesale Club, reported fourth- quarter results that were mixed, but have a long runway for growth amid shoppers stocking up on staples during the COVID-19 outbreak.

The retailer also announced a new cost reduction program that aims to increase efficiencies across the company.

For the period ended Feb. 1, BJ's Wholesale Club said that net sales increased by 1.5% to $3.4 billion for the quarter and by 1.3% to $12.9 billion for fiscal 2019. Same-store sales, excluding gasoline sales, increased 0.3% for the quarter and 1.3% for fiscal 2019. Net income was $187.2 million, or $1.35 per diluted share for fiscal 2019, reflecting 29% year-over-year growth. Adjusted net income was $203.4 million, or $1.46 per diluted share, for fiscal 2019, reflecting 10% year-over-year growth.

"Fiscal 2019 was a solid year, anchored by foundational work to expand our omni capabilities and to enhance the quality of our membership, which will enable us to deliver growth and continue to transform the company," said Christopher J. Baldwin, executive chairman. "As we look ahead, we are well positioned to build on this foundation and remain confident in the fundamentals of our business and our long-term prospects."

The company also revealed that it has launched Project Momentum, a cost reduction program expected to generate savings over the next two years, enabling the retailer to invest more aggressively behind growth opportunities.

During a March 5 fourth-quarter earnings call, new CEO Lee Delaney said that the retailer is "under-assorted" in "key growth categories" such as plant-based foods, multicultural items, active nutrition and organic products, and that the company will be moving quickly to fix this state of affairs. 

In its third-quarter fiscal report in November, the club retailer said that it was updating its value proposition to include a “simplified” grocery assortment, more private label products and a sharper focus on general merchandise.

This week, the company said it expects net income of between $214 million and $237 million in the fiscal year, a range that marks growth on the $187.2 million achieved in 2019. Earnings per share are forecast at between $1.55 and $1.72, compared with $1.35 in the last fiscal year. BJ's added that it expects same-store sales excluding gas to grow by between 1% and 2%.

Westborough, Mass.-based BJ’s operates 217 clubs and 140 BJ's Gas locations in 16 states.

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