BJ's Wholesale Club Reports September Sales; Lowers Earnings Estimates for the Third and Fourth Quarters

Business Wire, Oct 10, 2002

Business Editors

NATICK, Mass.--(BUSINESS WIRE)--Oct. 10, 2002

Q-3 Financial Results to Include Incremental Pretax Charges of

Approximately $21 - $25 Million

BJ's Wholesale Club, Inc. (NYSE: BJ) today reported sales for September 2002 and lowered its sales and earnings estimates for the third and fourth quarters. For the month of September, BJ's sales increased 11.2% to $509 million from $458 million in September 2001. Year-to-date, sales have increased by 12.1%. Comparable club sales for the month of September increased by 0.5% and have increased by 2.6% year-to-date.

The Company also announced today that it expects to record incremental pretax expenses of approximately $21 - $25 million, or approximately $.20 per diluted share, during the third quarter, primarily related to the Company's planned exit from the Columbus, OH, market, comprising two clubs, and the closing of one older, non-prototypical club in North Dade, FL.

In addition, BJ's announced that substantial progress is being made in closing out its House2Home lease liabilities. As a result, the Company is reevaluating its liability and anticipates reversing a portion of its House2Home reserve by the end of the third quarter. This reversal is anticipated to have a material impact on third quarter results.

Commenting on the Company's planned club closings, BJ's president and chief executive officer, Mike Wedge, said, "While we're happy with our Cleveland, Ohio, market, the two clubs in Columbus have been consistently unprofitable. By exiting this market, we will be more able to focus our attention on growing not only top-line sales, but also bottom-line profitability in our major growth corridor along the east coast and the southeastern United States."

Based on the prospects that economic uncertainties and waning consumer confidence may continue to dampen spending, the Company is revising its comparable club sales outlook from a 3% increase to a flat to 1% increase for the remainder of the year.

The following earnings estimates include interest accretion charges of approximately $.01 per quarter, related to the Company's House2Home lease liability but exclude any adjustment of reserves related to the House2Home lease liability: The Company expects to report earnings of $.16 to $.18 per diluted share for the third quarter, and $.80 to $.82 per diluted share for the fourth quarter. For the full year ending February 1, 2003, diluted earnings per share are expected to be in the range of $1.77 to $1.81. Prior guidance was for third quarter earnings of $.42 - $.44 per diluted share, and fourth quarter earnings of $.88 - $.90 per diluted share.

Mr. Wedge continued, "While our revised sales estimates for the balance of the year are based on a flat to 1% comparable club sales increase, BJ's has the merchandising and distribution flexibility to respond quickly if the sales trend changes. It's also important to note that BJ's remains strongly committed to growth. Over the next two years, the focus of that expansion will be more heavily weighted in existing markets, where new clubs typically start out at higher sales levels and reach profitability much sooner than clubs in new markets. For example, BJ's new Brooklyn, NY, club, which opened in September, achieved the highest first-week sales volume of any club in BJ's history."

The pretax incremental expenses of approximately $21 - $25 million during the third quarter will include asset impairment charges of approximately $2 million and a charge of approximately $1.1 million for a payment made to former president and CEO Jack Nugent in connection with his departure from the Company.

                     Sales Results for September
                           ($ in thousands)

                Five Weeks Ended              % Change
              October 5, October 6,           Net   Comp.
                2002       2001              Sales  Sales

              $509,367   $458,010            11.2%   0.5%

               Thirty-five Weeks Ended        % Change
              October 5,     October 6,       Net   Comp.
                2002           2001          Sales  Sales

              $3,646,873    $3,253,464        12.1%  2.6%

The Company provided the following additional information on September sales:

BJ's comparable club sales increased during weeks one, two and three, and decreased during weeks four and five. By major market, BJ's experienced positive comparable club sales in the New England, Metro New York, Upstate New York and Southeastern regions. Comparable club sales in the Baltimore/Washington DC/Northern Virginia region were below the chain average due to uncycled competition and self-cannibalization from two new BJ's clubs in Maryland.

Gasoline sales contributed approximately 1% to comparable club sales in September. Merchandise categories with strong sales increases included jewelry, prerecorded media, video games, and bottled water. Weaker categories included apparel, computer equipment, electronics, televisions and tires.

In October, BJ's plans to open new clubs in Queens, NY, Monroe, NY, and Garner, NC. The last of this year's new clubs is scheduled to open in Hamilton Township, NJ, in November.