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Comparing Costco & BJ's Results

 March 04, 2009 12:04 PM

This morning, two membership warehouses reported 4th quarter results. Costco (COST) missed Zacks consensus EPS estimates by $0.05, while revenues were in line. BJ's Wholesale Club (BJ) reported earnings of $0.89 per share $0.03 above the Zacks consensus estimate, while falling a little short on revenue.

Both companies were negatively affected by gasoline deflation. As gasoline prices fall, BJ's and Costco's overall gasoline sales fall. Costco, which generates about 20% of its sales outside the US, was also hurt by the stronger US dollar.

Those trends were largely offset by an increasing number of consumers looking to get the most value for the dollar. This is evident in the 3.7% rise in Costco's membership fees and a 7% increase in BJ's store traffic (excluding gasoline sales).

Both companies are attracting shoppers because of their prices are so low. The companies' razor-thin gross margins shows this to be the case. In the 4th quarter, Costco had an overall merchandise margin of 12.3%, down from 12.5% in the year-ago quarter.

BJ's gross margin is lower than Costco's, but it moved higher in the 4th quarter. BJ's gross margin was 11.3%, up 20 basis points from the year-ago quarter. In the current economic environment, more shoppers will be walking the aisles of a Costco or BJ's Wholesale Club.

Looking ahead, BJ's expects to earn $2.26-$2.36 per share compared to the Zacks consensus of $2.26 consensus. Consistent with its Feb 4 pre-announcement, Costco did not provide full-year guidance.
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