BJs emphasizing GM, cutting SKUs
BJ’s Wholesale Club is updating its value proposition to include a “simplified” grocery assortment, more private label products and a sharper focus on general merchandise.
In a third quarter earnings call, CEO Chris Baldwin said the company is seeing progress on these initiatives but still “has a lot of work to do.”
“We're making a sustained effort to transform and simplify our assortment. We're transforming our edible and non-edible grocery business. We strongly believe that limiting our assortment will offer better clarity for offering the right opportunities for sourcing savings and freeing up space to drive growth through entry into new categories,” Baldwin said.
The company said its transformation priorities for 2020 will focus on (1) acquiring and retaining members (it currently has the highest percentage of paid members in company history) and (2) delivering value to shoppers through a smaller assortment, personalized promotions, and improved services. Baldwin also said he expects the retailer to be “led by general merchandise” going forward.
The company said it expects to reduce grocery SKUs in the “double-digit percentage range through 2020.” Baldwin said BJ’s expects “some short-term pressures on comps” as a result of this strategy, but that shoppers are responding favorably to the simpler assortment in new stores.
“We're taking a very deliberate approach in this area, taking time to make sure we get the simplified assortment right,” Baldwin said.
He said the retailer’s own brands are central to providing great value to members, to assortment simplification, and to category profit improvement efforts.
“We will continue to increase own brand penetration. It's currently above 20% and we remain on track to get to 21% for the full year,” Baldwin said.
Part of BJ’s Wholesale Club's transformation plan also has been to expand its fresh offering and customize promotions, and so far shoppers are loving those efforts.
“We're particularly pleased with our performance in prepared foods, which we introduced this year. Our new clubs in Michigan were launched with an expanded assortment of prepared foods showing very strong early results,” Baldwin said. “Also, personalized offers are based on members’ personal purchase history, giving us a powerful vehicle to engage members and drive trips and baskets. While this is still in the very early innings, we're confident that our investment in the system will deliver outstanding value to our members, drive trips and enable to us to use our promotional dollars more effectively.”
Q3 FINANCIAL PERFORMANCE
For the third quarter ended Nov. 2, BJ’s Wholesale Club posted its ninth straight quarter of positive comps, with a 1.1% increase. Net sales for the third quarter increased 0.1% to $3.2 billion. Net income was $55.1 million, or 40 cents per diluted share, and adjusted net income was $56.6 million, or 41 cents per diluted share.
The company said comps and profits were pressured during the quarter as a result of a shift in the promotions calendar and a warmer than normal October, which led to fewer general merchandise sales.
Late in the quarter BJ’s launched same-day delivery for beer, wine and liquor in 74 clubs in seven states. It also expanded mobile ordering for deli items, which allows members to place their orders in advance and save time once they're in the club.
“Convenient services, while still small compared to the rest of the business, continue to grow and resonate with our members. Buy online, pick up and club in same day. Delivery continued to accelerate in the third quarter. About half of our book users make additional purchases must get in the club,” Baldwin said.