BJ's Wholesale Club gains 27% in profit, 13% in revenue

No. 3 warehouse chain credits food, gasoline sales

August 18, 2004|By BLOOMBERG NEWS

NATICK, Mass. - BJ's Wholesale Club Inc., the third-largest U.S. warehouse-club chain, said second-quarter profit rose 27 percent as higher gasoline and fresh food sales more than offset the establishment of a reserve to pay claims related to the theft of customer credit information.

Net income in the quarter that ended July 31 rose to $28 million, or 40 cents a share, from $22 million, or 32 cents, for the second quarter last year, the company said. Per-share earnings exceeded the 37 cent average estimate of 18 analysts surveyed by Thomson Financial.

Revenue rose 13 percent to $1.8 billion from $1.6 billion. Chief Financial Officer Frank D. Forward forecast third-quarter earnings per share of 28 to 32 cents.

BJ's said it reduced its profit by $3.6 million, or 5 cents a share, that it set aside for claims after credit information on its customers was stolen. The theft, disclosed in March, led to fraudulent credit- and debit-card charges at other merchants.

The total cost could rise to $16 million, including $6 million in actual claims from banks affected by the fraud, the company said. BJ's didn't identify the banks and plans to contest the claims.

The Secret Service is investigating, said Charlie Bopp, a spokesman for the agency. He wouldn't provide additional details.

About 700 cards issued through Sovereign Bancorp Inc. had fraudulent charges, not all related to BJ's, said Ellen Molle, a Sovereign spokeswoman. She said the bank spent about $500,000 in May to replace about 81,000 cards that might have been affected.

The company is still deciding whether to seek reimbursement from BJ's, Molle said.

BJ's, which has 151 stores and 79 gas stations, said sales of fresh foods, gasoline, health and beauty aids and paper products were strong. Sales of fans and air conditioners fell because of cooler weather in the Northeast.

BJ's shares rose $1.77, or 7.5 percent, to $25.16 on the New York Stock Exchange. They had risen 1.9 percent this year.

Costco Wholesale Corp. is the largest U.S. warehouse-club chain, and Wal-Mart Stores Inc.'s Sam's Club unit is the second-biggest.

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