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BJ's earnings up, but just barely

NATICK, MASS. — With weaker margins and rising costs offsetting a double-digit gain in sales, BJ's Wholesale Club Inc., a Northeast no-frills retailer, pushed fourth-quarter earnings up a skimpy 1.5 percent, to $49.2 million from $48.5 million last year.

Sales at the warehouse club climbed by 12.6 percent, to $1.9 billion from $1.7 billion last year, with the all-important measure of same-store sales rising by 7.5 percent, including a contribution of about 1 percentage point from gasoline sales.

Taking a bite out of the bottom line, average gross margin contracted by 20 basis points, or two-tenths of a percentage point, to 9.5 percent from 9.7 percent the preceding year. In another drag on earnings, costs climbed higher by 40 basis points, or four-tenths of a percentage point, to 7.3 percent of sales from 6.9 percent a year ago. Measured in absolute dollars, costs shot up by 19.5 percent, far outpacing the 12.6 percent increase in sales, to $138.8 million from $116.2 million last year.

For all of last year, net income fell by 21.4 percent, to $102.9 million from $130.9 million. Sales for all of last year rose by 14.9 percent, to $6.6 billion from $5.7 billion, and same-store sales rose by 7.8 percent.

B.J.'s Wholesale Club Inc.

Qtr. 1/31 (x000) 2003 2002 % chg
a-Net sales, excluding membership fees of $36.1 million, up 6.5 percent from$33.8 million last year. For all of 2003, membership fees of $139.4 million rose 6.6 percent from $130.7 million.
b-Third-quarter results include interest income of $48,000, compared with $23,000 in interest expense last year; a $2.5 million gain on contingent lease obligations, vs. a $574,000 loss a year ago; and a $154,000 loss from discontinued operations, compared with a $707,000 year-before loss.
c-12-month results include $74,000 in interest expense, compared with $293,000 in interest income the prior year; a $4.5 million gain on contingent lease obligations vs. a $15.6 million gain a year ago; a $676,000 loss from discontinued operations, compared with a $14.9 million loss in 2002; and a $1.3 million loss stemming from a change in accounting.
Sales $1,893,196a $1,681,194a 12.6
Oper. income (EBIT) 76,387 80,746 -5.4
Net income 49,229b 48,490b 1.5
Per share (diluted) 0.70 0.70 0.0
Average gross margin 9.5 9.7 --
SG&A expenses 7.3 6.9 --
12 months 2003 2002 % chg
Sales 6,584,808a 5,728,955a 14.9
Oper. income (EBIT) 172,574 231,515 -25.5
Net income 102,866c 130,866c -21.4
Per share (diluted) 1.47 1.84 -20.1


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