Dive Brief:
- Same-store grocery sales at BJ Wholesale Club were off 10% during the first quarter compared with that time frame in 2020, but rose 23% in comparison with their level during the same period two years ago, Executive Vice President and Chief Financial Officer Laura Felice said Thursday during the company's earnings call.
- BJ's also announced on Thursday it plans to open six new locations in New Hampshire, Florida, New York, Pennsylvania and Michigan in 2021.
- Like other retailers, BJ's is looking to reset expectations about its performance and future prospects as the pandemic-driven surge it recorded in 2020 subsides.
Dive Insight:
Even as BJ's digests financial results that were markedly down from the levels it recorded last year, the club retailer believes it is on strong footing for growth during the coming quarters.
The retailer rode a wave of membership growth over the past year and is seeing customers renew at robust levels, factors that bode well for the company, President and CEO Bob Eddy said during the earnings call.
The membership-based retailer saw same-store sales decline 5% during Q1 on a year-over-year basis. Identical store sales during the 13-week period, which ended on May 1, were up 22% compared with the same period in 2019.
"Please don't confuse the short term with the long term," Eddy said. "The short term is going to have bumps in it. It's going to be more about what happens with food at home as the world reopens. Once we get through this noisy period ... the membership alone should empower us to have much better comps than we did pre-pandemic."
Inflation is another dynamic that could benefit BJ's because of the membership retail sector's reputation for offering products at a discount. While the company didn't see much inflation during Q1, it is now starting to see prices trend upward, Eddy said.
With the Consumer Price Index up a sharp 4.2% over the past year, 54% of respondents to an online survey conducted between May 14-17 by shopping rewards app Shopkick said they are very concerned about rising prices. Eighty-three percent of the 19,000 survey participants intend to reduce their budgets because they perceive that costs are going up.
"It's important to think about inflation as potentially a good thing. It gets a bit of a bad rap on a headline, but in our business it … when managed appropriately, can widen price gaps and make us look a little bit better," Eddy said. "It can certainly pressure consumers' wallets, and anytime consumers' budgets are pressured, they come to our channel."
Felice noted efforts by BJ's to hold down prices for shoppers even as its costs go up can put pressure on its bottom line. For example, she said BJ's decision to invest "meaningfully" to keep egg prices down in Q1 hurt the retailer's gross margins for the period.
BJ's continues to see its e-commerce business expand. Digital sales rose 31% during Q1 and were up 381% over that period in 2019. Half of the pickup orders in Q1 were fulfilled curbside, validating the retailer's decision last year to expand curbside service chainwide, according to Eddy.
In a reflection of the importance of online sales to BJ's operations, e-commerce drove roughly 7 percentage points of the company's 22% comp growth compared with the first quarter of 2019, Felice said.
BJ's is also seeing success as it looks to boost sales of items carrying its own brands. The company's private label business saw 23% penetration during Q1 and could exceed 30% next year, Eddy said.
The retailer currently operates 221 locations in 17 Eastern U.S. states. Of the new locations planned for this year, the Pennsylvania stores, both of which are near Pittsburgh, and the new store in Lansing, Michigan, represent new markets for the retailer.
