BJ’s Wholesale Club 3rd-quarter profit drops on legal settlement reserve, sales rise

BJ’s Wholesale 3Q profit falls on legal reserve

NATICK, Mass. — A legal settlement pushed down third-quarter profit at BJ’s Wholesale Club Inc. 37 percent, the warehouse club operator said Wednesday. But shoppers looking for bargains on food and everyday items sent its sales higher.

Consumers’ focus on basics in the recession has worked in BJ’s favor, as the company has a heavier emphasis on food than some of its competitors.

BJ’s reported some of its strongest sales in basics like cereal, cigarettes, deli housewares and paper products. Its electronics, tires, video games and oils and shortenings categories were among the weaker performers.

The wholesale club operator earned $17.7 million, or 32 cents per share, for the period ended Oct. 31. That’s down from $28.2 million, or 48 cents per share, a year ago.

The current quarter’s results include a charge of $11.7 million, or 13 cents per share, for a reserve to settle a labor claim. Its performance was also squeezed by higher selling, general and administrative expenses and increased expenses to open new clubs.

Excluding the legal charge and other items, earnings were $24.6 million, or 45 cents per share.

This met the expectations of analysts polled by Thomson Reuters, whose estimates generally exclude one-time items.

Shares fell $1.05, or 2.9 percent, to $35.29 in premarket trading.

BJ’s revenue rose 2 percent to $2.51 billion from $2.46 billion to top Wall Street’s $2.48 billion estimate. Revenue from membership fees improved to $45.9 million from $44.5 million.

Sales at stores open at least a year fell 2.5 percent in the quarter, pressured by lower gasoline sales. That figure is a key indicator of a retailer’s performance because it measures growth at existing stores rather than newly opened ones. It rose 3.9 percent excluding gasoline.

The company anticipates a fourth-quarter profit of 96 cents to $1 per share. Sales are expected to climb 10.5 percent to 12.5 percent from the prior year’s $2.56 billion, which implies revenue of $2.83 billion to $2.88 billion.

Analysts predict fourth-quarter earnings of 97 cents per share on revenue of $2.76 billion for the period ending Jan. 30, 2010.

BJ’s, which is based in Natick, Mass., ran 184 warehouse clubs in 15 states at quarter’s end.