BJ’s Wholesale Club stated on Wednesday that it plans to launch four new clubs in the Southeast and one in the Midwest this year. This expansion aims to attract members in different regions amid stiff competition in the membership warehouse market.
“The new stores will open this fiscal year in Maryville, Tennessee; Myrtle Beach, South Carolina; Palm Coast and West Palm Beach, Florida; and Carmel, Indiana. The company plans to open a dozen new clubs this fiscal year, including an already announced club in Louisville, Kentucky.”
In an area dominated by giants like Costco and Walmart-owned Sam’s Club, BJ’s Wholesale Club is striving to carve out its niche.
Sam’s Club announced its intention to open more than 30 stores in the U.S. over five years, while Costco anticipates launching 30 new clubs globally in its fiscal year, including relocations, with a significant portion designated for the U.S.
The trend towards expansion isn’t unique to warehouse clubs; value-focused retailers such as Dollar General, Burlington, and Aldi are also aggressively increasing their footprint. According to Coresight Research, these retailers lead in new store announcements for the year.
Club stores like BJ’s resonate with budget-conscious consumers by offering value-driven deals, aligning with the growing demand for maximizing savings.
BJ’s trails behind its competitors in terms of reach, mainly focusing its club presence on the East Coast from its Marlborough, Massachusetts headquarters. While its expansion will extend to 21 states, Costco already boasts clubs in 46 states, plus Washington D.C. and Puerto Rico, as of the end of its fiscal year on Sept. 3. Similarly, Sam’s Club operates in 44 states and Puerto Rico.
However, BJ’s has been on a growth trajectory since 2016, intensifying efforts to penetrate new markets, according to Bill Werner, the retailer’s Executive Vice President of Strategy and Development.
Over the past five years, it has introduced 27 new clubs and ventured into four additional states: Tennessee, Alabama, Indiana, and Michigan, with seven new clubs launched just last fiscal year.
Werner outlined plans to continue this expansion, aiming to open 10 to 12 clubs annually.
Despite this growth, BJ’s faces the challenge of persuading customers to invest in memberships, especially if it’s not their primary club choice in their local area.
Greg Melich, a retail analyst at Evercore ISI, highlights BJ’s potential to differentiate itself through its focus on grocery items. Offering nearly double the variety compared to its competitors, BJ’s emphasizes fridge staples like fresh produce and deli meats.
Beyond bulk household essentials like laundry detergent and paper towels, it also caters to shoppers with smaller items such as milk gallons and single loaves of bread, catering to weekly grocery needs.
“You may be able to purchase a piece of cheese that’s not two pounds,” Melich asserted.
He suggested BJ’s would be wise to concentrate on diverting sales from regional and national supermarkets such as Publix and Kroger.
“It would be a mistake for BJ’s to attempt to emulate Costco,” he remarked. “That’s not the objective. The objective is to offer products at lower prices than those found at local grocery stores.”
BJ’s Werner indicated that the typical customer of the company has an average household income ranging between $75,000 and $100,000. He further noted that in the new markets, BJ’s has ventured into, it has managed to attract members who are already affiliated with another club.
Earlier this month, BJ’s projected modest growth for the full year. The retailer forecasted that comparable club sales would rise by 1% to 2% year over year, excluding gas sales.
It stated that adjusted earnings per share would range from $3.75 to $4.00, with the lower end of the spectrum falling below the $3.96 reported for the most recent fiscal year.
By the close of Tuesday’s trading session, BJ’s shares had surged more than 12% this year, outperforming the S&P 500′s gains of over 9%.
