BJ's Updates Guidance for 2010 after Strong 3Q

NATICK, MASS. - BJ's Wholesale Club Inc. recently offered its updated guidance for fiscal 2010 after a favorable third quarter.
     Net income for the third quarter, ended Oct.30, shot up by 32% to $23.0 million, or 43 cents per share. Results included a pre-tax charge of $11.7 million ($6.9 million post-tax) in connection with the settlement of a legal claim relating to wage and hour job classification claims.
     The 190-club chain also reported a 4.8% increase in sales to $2.57 billion. Comparable club sales increased 2.5%, excluding the impact of gasoline sales, and merchandise comps grew 1.5%.
     Traffic in the quarter grew by 2.4%, but average ticket decreased by about 1%.
     "The food and perishable categories remained strong but general merchandise and non-edible consumables were weaker than planned [in the third quarter]," explained Frank Forward, evp, cfo, during BJ's earnings call. "Comps increased by 4% and general merchandise sales decreased by 3%."
     "Within general merchandise, we had soft sales in apparel, affected by a warm fall in the Northeast, and sales of televisions remained weak with a comp decrease of about 9%," he continued. "Additionally, non-edible consumables were affected by deflation and trading down."
     For the first nine months of 2010, net income grew 10.5% to $84.8 million, or $1.58 per diluted share. Sales rose 8.6% to $7.84 billion. Comparable club sales saw a 4.8% increase, excluding the impact of gasoline sales, and merchandise comps increased 2.8% year to date.
     Encouraged by its third-quarter results, BJ's revised its earnings guidance for fiscal 2010, which ends Jan. 29. The company now expects net income in the range of $133.6 million to $135.6 million and earnings per share in the range of $2.48 to $2.52. By comparison, BJ's previously expected net income in the range of $128.5 million to $134.5 million and diluted earnings per share in the range of $2.40 to $2.50.
     However, BJ's withheld guidance for 2011.
     "Given the difficult economic environment that we expect to face in the fourth quarter, we think it is prudent to get through Q4 before providing guidance for 2011," Forward said. "We do expect to see some gradual improvements next year. And our membership fee will increase $5 starting in January."
     The company expects to provide detailed guidance for next year in early March.

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