BJ's CEO: Lower prices are good for you, but bad for our sales

By Tomi Kilgore

More 'disinflation' than expected, including deflation in eggs, led to same-store sales miss

"Lower inflation is a headwind to our reported [comparable-club sales] but it helps our members, who have coped with higher prices for the better part of the last two years."BJ'S Wholesale CEO Bob Eddy

BJ's Wholesale Club Holdings Inc. (BJ) Chief Executive Bob Eddy made that comment on the membership-based warehouse retailer's post-earnings conference call with analysts, as the company beat earnings expectations but reported a decline in comparable-club sales, or sales from stores that have been open more than a year.

Eddy said that while inflationary trends were still present in the third quarter, they were "significantly lower" than last year.

One example Eddy gave was the price of eggs. In BJ's fiscal first quarter, a 50% increase in egg prices from a year ago helped increase the value of same-store sales by 5.7%. But in the latest third-quarter, there was "double-digit percentage deflation."

"We experienced more disinflation during the quarter than we expected, particularly in our perishable-food business," Eddy said on the call, according to an AlphaSense transcript.

Basically, even though traffic was "very strong," lower prices led to less money spent. And third-quarter comparable-club sales dipped 0.1%, while Wall Street was expecting a rise of 1%.

BJ's stock slumped 3.7% toward a two-month low in afternoon trading.

For the current quarter, Chief Financial Officer Laura Felice said she expects some continued disinflation, or lower inflation, but "not deflation."

Fourth-quarter comparable-club sales are expected to range from down 2% to up 1%, while the current FactSet consensus calls for a 0.5% increase.

-Tomi Kilgore

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11-17-23 1419ET

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