July 15, 2009 / 3:58 PM / 8 years ago

BJ's has sights on grabbing share from supermarkets

3 Min Read

SAN FRANCISCO, July 15 (Reuters) - BJ's Wholesale Club Inc. BJ.N, the No. 3 U.S. warehouse club operator, is focused on taking business from grocery stores as consumers look to save money on food in the recession.

"Of all BJ's competitors, supermarkets represent the greatest opportunity for taking market share, based on their operational inefficiencies and much higher retail prices," Chief Executive Laura Sen said on Wednesday at an Oppenheimer conference that was broadcast over the Internet.

Sen said BJ's foremost advantage over supermarkets was its lower cost structure.

"The average supermarket normally stocks between 30,000 and 50,000 SKUs, or items, which require tremendous amounts of labor and handling," she said. By contrast, BJ's typically stocks 7,200 SKUs.

Supermarkets also are burdened with higher costs for store decor and advertising, Sen said. "All of these expenses end up being passed on to the consumer in the form of higher prices."

On a basket of like items, Sen said BJ's shoppers could pay 30 percent to 35 percent less at BJ's than at a supermarket.

BJ's is the smaller rival of Costco Wholesale Corp (COST.O) and Wal-Mart Stores Inc's (WMT.N) Sam's Club. The retailers are attracting more customers, who pay an annual fee to shop in the clubs in exchange for lower prices.

While BJ's carries the bulk-sized merchandise for which warehouse clubs are well known, it has tried to differentiate itself and appeal to families by stocking smaller, supermarket sizes of key grocery items like milk and butter.

Much like many supermarkets but unlike most of its warehouse club competitors, BJ's also accepts all major credit cards, manufacturer's coupons and food stamps.

In May, the company reported a nearly 42 percent rise in quarterly profit. It has said it intends to win sales by stealing business from restaurants and grocery stores.

BJ's, which operates 182 clubs in 15 states, still has "plenty of opportunities for growth in our existing markets," Sen said.

The company expects to open 6 to 8 new clubs this year, up from 4 last year.

BJ's shares were down 16 cents at $31.88 in midday New York Stock Exchange trading. (Reporting by Nicole Maestri; Editing by Lisa Von Ahn)

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