Is Shift Away from Supermarkets, Restaurants Permanent?

by: Judy Weil

BJ’s Wholesale Club Q308 conference call gives a good sense of some of the important retailing trends today:

People are eating out less, but they’re still willing to pay for organic foods, laptops and GPSs:

Q: Your traffic trends have been some of the best in retail… how much do you think is trade down out of the supermarkets and how much could be lower gas prices?

A: In order of magnitude the first would be a shift in channels from supermarkets to us… Casual dining fall out has driven people to prepare food at home and buy foods for eating at home… The benefit from gasoline… is powerful and meaningful… Deflation affects demand, [but] it certainly hasn’t affected our gasoline demand and I think it has been a contributor to our value image.

There is definitely a shift to wholesale club business.

Our sales of organic and natural foods continued to grow, increasing by approximately 46% versus last years third quarter.

Our higher than expected increase in sales of food more than made up for the decrease in sales of general merchandise. The biggest hit to general merchandise in the quarter was the decrease in television sales. Other than TVs the largest declines in general merchandise sales were in jewelry, DVDs and electronics. While we are not planning for positive general merchandise comps during the fourth quarter I should mention that there are a few bright spots including notebook computers, small appliances, house wares, GPS and video games.


The impact of gasoline on our margin in Q3 was 21 basis points favorable to last year as compared to our guidance of 40 to 50 basis points unfavorable… As gasoline prices steadily plummeted throughout Q3 it allowed us to offer a tremendous value on gasoline to our members relative to our competition, while at the same time achieving unprecedented gasoline margins [and] significant increases in gallons sold. I should mention that since we started selling gasoline in 1998 we have never seen such market conditions…

Although we came down [our competitors] didn’t seem to come down very rapidly.

Are businesses still spending on IT?

Q: Road map expenses for 2009?

A: The big things that we’re working on right now is we’re going to be changing our payroll system, adding in new software HR system, we’re starting to work to replace all our registers in the clubs, and we’re doing fairly significant amount of work to change mainframe data provider.

Real estate:

Next year we plan to open six to eight new clubs and six to eight gas stations. I should mention that with so much uncertainty in the credit markets our construction and development partners may experience restricted access to financing. We may be more cautious with our share repurchase activity next year in order to ensure that we have the capital we need to fund future chain expansion as needed.