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Market Update

BJ's Q4 Earnings Call Transcript

Author: 123jump.com Staff
Last Update: 7:32 AM ET March 17 2010

BJ''s Wholesale Club, Inc. (BJ)
Q4 2009 Earnings Call Transcript
March 3, 2010 8:30 a.m. ET


Cathy Maloney Vice President of Investor Relations
Laura J. Sen President and Chief Executive Officer
Frank D. Forward Executive Vice President and Chief Financial Officer


Daniel Binder Jefferies & Company
Chuck Cerankosky Northcoast Research
Nathan Rich Citigroup
Charles Grom J.P. Morgan
Robert Drbul Barclays Capital
Peter Benedict Robert W Baird
Adrianne Shapira Goldman Sachs
David Schick Stifel Nicolaus
Laura Champine Cowen and Company
Robby Ohmes Bank of America/Merrill Lynch
Joe Bark [ph] Morgan Stanley
Charles Ruff Insight Investments
Michael Exstein Credit Suisse
Joseph Feldman Telsey Advisory Group



Good morning and welcome to the BJ''s Wholesale Club Incorporated Fourth Quarter Earnings and Fiscal Year Results Conference Call. There will be some formal remarks made by the company and then we will open up the call for questions. At this time, I would like to turn the call over to Vice President of Investor Relations, Miss Cathy Maloney. Please go ahead.

Cathy Maloney

Thank you. Good morning everyone. With me are Laura Sen, President and CEO and Frank Forward, Chief Financial Officer. Before we begin, let me remind everyone that the discussions we are having include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause actual results, events and our performance to differ materially from those indicated by such statements.

The risks and uncertainties include, but are not limited to levels of gasoline profitability, levels of customer demand, economic and weather conditions, the rate of inflation or deflation, federal, state and local regulation in the company''s markets, federal budgetary and tax policy, litigation, competitive conditions and other factors discussed in the company''s most recent annual report, which is on file with the SEC. Forward-looking statements represent our estimates only as of today. While the company may elect to update its forward-looking statements, the company specifically disclaims any obligation to do so, even if the company''s estimates change.

During today''s call, we will be referring to non-GAAP financial measures. These measures are not prepared in accordance with generally accepted accounting principles. The GAAP normalized earnings comparisons which we will discuss today exclude various items as detailed in the reconciliation to the most directly comparable GAAP that is included in the Form 8-K we submitted this morning, a copy of which can be accessed on our website at www.bjsinvestor.com.

We believe our non-GAAP normalized presentation provides a meaningful comparison of operating results. The 8-K, we submitted to the SEC this morning also includes an exhibit called supplemental information, which contains detailed sales information for the fourth quarter and full year ended January 30, 2010 as well as detailed earnings guidance for the first quarter and full year ending January 29, 2011.

Now, I''ll turn the call over to Frank Forward.

Frank D. Forward

Thank you, Cathy. Good morning everyone. For the fourth quarter of 2009, non-GAAP normalized net income was $51.6 million versus $51.3 million in 2008, an increase of 0.4%. Non-GAAP normalized earnings per share in 2009 were $0.95 per diluted share versus $0.89 in 2008, an increase of 6.7%. For the full year on a non-GAAP normalized basis, net income was a $135.6 million versus $126.0 million in 2008, an increase of 7.6%.

Non-GAAP normalized earnings per share in 2009 were $2.48 per diluted share versus $2.14 in 2008, an increase of 15.9%. We had two income items in Q4 that we considered unusual. First, we recorded income of $3.0 million pretax, $1.8 million post tax or $0.03 per share attributed to payments we and many other retailers, received from a class action settlement involving the credit card interchange fees charged by MasterCard and Visa.

Second, as you may recall, beginning in 2004, we established reserves related to claims against us as a result of the theft of credit card data from our systems. The legal claims arising from these alleged data breaches have been resolved and in the quarter we took into income $2.9 million or $1.7 million post tax or $0.03 per share as an adjustment to those reserves.

In summary, our fourth quarter non-GAAP normalized net income reflected strong merchandise margins and membership fee income being mostly offset by soft merchandise comp sales, increased investment costs in the business, particularly in technology and the clubs and by gasoline income that was $0.02 per share below last year. Total sales for the fourth quarter were $2.74 billion compared to $2.5 billion last year, an increase of 9.4%.

Fourth quarter comparable club sales increased by 4.6%, which included a favorable impact from gasoline sales of 2.3%. Comp merchandise sales excluding gasoline also increased by 2.3%. We estimate that the merchandise comp sales were unfavorably affected by about 1.5% from the combined impact of severe northeast storms the weekend before Christmas and a timing shift of the Super Bowl. And as I''ll cover in more detail later, we continue to be significantly impacted by deflationary pressures, particularly in perishables. However, despite these headwinds on sales, our Q4 comp traffic increased 4% which reflected continued market share gains.

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