BJ’s Wholesale Club is looking to accelerate growth in 2020 after eliminating 70 headquarter positions in the fourth quarter as part of a cost reduction program dubbed, “Operation Momentum.”
CEO Lee Delaney shared his vision for the company for the first time since being named to succeed Chris Baldwin as CEO last fall. He outlined a plan focused on omnichannel, membership, merchandising, systems and analytics.
“Our priority is clear. We must grow faster,” Delaney said after the company reported fourth quarter results. “We'll do this by investing more aggressively into growth opportunities and accelerating those areas of our transformation that are delivering results.”
Fourth quarter sales increased 1.5% to $3.4 billion and membership income increased 6.2% to $77.6 million. Same store sales increased 0.3% excluding fuel sales, but net income declined 35.1% to $41.2 million. Full year product sales increased 1.3% to $12.9 billion and membership income increased 6.8% to $302 million. Full year same store sales increased 1.3% and net income increased 47.1% to $187.2 million. This year, the company expects same store sales to increase between 1% and 2% and it plans to add four new locations to its base of 217 clubs in 17 states.
“To help fuel our investments in the fourth quarter, we launched Project Momentum, a cost reduction program that will deliver at least $100 million of savings over the next two years,” Delaney said.
The project included a realignment of the company to support strategic initiatives and remove duplicative work which result in the elimination of 70 positions at the retailer’s home office and field management structure.
Looking ahead, Delaney said BJ’s omnichannel business would be key to delivering the convenience members' demand and one of the company’s highest priorities.
“This business grew nicely last year and in the fourth quarter particularly. We are investing in omni-channel for the long-term and believe our capabilities in buy online, pick-up in club and same-day delivery offer the potential for considerable growth,” Delaney said.
A second area of emphasis is understandably membership since that is a foundation of the warehouse club model. Delaney said BJ’s is improving the quality of its membership base and becoming less reliant on trial memberships which accounted for 10% of membership five years ago compared to less than 3% today.
Another area of emphasis relates to product assortment, according to Delaney.
“We have a tremendous opportunity to enter new product and service categories, where we can offer great member value and deliver growth,” he said. “For example, we're under assorted in key growth segments like healthy and organic products, plant-based foods, active nutrition, and multicultural items. We also offer considerably less assortment in general merchandise categories including connected home electronics, DIY products, camping supplies, and sporting goods. We also lack a full range of services. We will be adding things like cellular phones, home improvement and financial and business services.”
To find space for the new categories, BJ’s plans to thin its offering in traditional center store grocery categories where it is over-assorted.
“We offer way more choice in center store grocery categories than our members need,” Delaney said. “For example, we carry 4.5 times the pasta and sauce compared to our wholesale club competitors. We have four times the amount of the deodorant. This extra choice does not fuel growth and leaves us overdeveloped in declining and non-productive categories.”
BJ’s is also planning to accelerate growth of its own brands portfolio which is currently about 20% of sales and fill its real estate pipeline with new projects.
“We continue to transform our business and our top priority is to accelerate growth,” said CFO Bob Eddy. “Our past investments in omni, membership, merchandising, systems and analytics have laid the foundation for us to drive accelerated growth.”