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Costco and BJ’s Wholesale, Sam’s Club’s smaller rival, will open more clubs in the Southeast

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A BJ’s Wholesale Club is shown in Falls Church, Virginia on May 23, 2023.

Win Mcnamee | Getty Images

Big BJ club said Wednesday it will open four clubs in the Southeast and one in the Midwest this year, as it tries to expand and attract members in other parts of the country in a warehouse market. competitive membership.

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 a previously announced club in Louisville, Kentucky.

The smallest rival of Costco And WalmartCompany-owned Sam’s Club is just the latest warehouse club to share its expansion goals. Sam’s Club said in early 2023 that it would open more than 30 stores in the United States over a period of five years. Earlier this month, Costco said during an earnings conference call that it planned to open 30 new clubs around the world during its financial year, including two relocations. Twenty-two are planned in the United States

Their movements occur as Value-oriented retailers, such as off-price chains, are driving store growth in the United States. The retailers that have announced the most new locations so far this calendar year are Dollar General, Burlington and Aldi, according to Coresight Research, a retail consulting firm that tracks openings and closings.

Likewise, club stores resonate with budget shoppers because they emphasize getting more for less.

BY THE NUMBERS: Warehouse Clubs

BJs

Clubs in the United States: 244

Membership fee: $55 per year or $110 for higher level

Costco

Clubs in the United States: 603, including Puerto Rico

Membership Fee: $60 per year or $120 for higher level

Sam’s club

Clubs in the United States: 599, including Puerto Rico

Membership fee: $50 or $110 for higher level

Source: Company websites and most recent earnings releases

BJ’s has a smaller reach than its club rivals. Most retail clubs based in Marlborough, Massachusetts are focused on the East Coast. Its expansion will take it to 21 states from Costco, which had clubs in 46 states, Washington DC and Puerto Rico as of September 3, the end of its fiscal year. Sam’s Club has locations in 44 states and Puerto Rico.

Still, BJ’s has been in growth mode since 2016, when it ramped up efforts to enter new markets, said Bill Werner, the retailer’s executive vice president of strategy and development. He has opened 27 new clubs and entered four new states in the past five years: Tennessee, Alabama, Indiana and Michigan. It opened seven new clubs last financial year.

He plans to open 10 to 12 clubs each year in the future, Werner said.

Still, BJ’s will have to convince its customers to purchase a membership, which could be a challenge if it’s the second or third club in a customer’s backyard.

Greg Melich, retail analyst at Evercore ISI, said BJ’s can stand out with its emphasis on groceries. It has almost double the number of items offered by the club’s competitors, including many more fridge staples like fruits, vegetables and cold cuts. In addition to carrying laundry detergent and paper towels in bulk, it also sells smaller items like a gallon of milk or a single loaf of bread that lend themselves to a weekly grocery run.

“You might be able to buy a piece of cheese that doesn’t weigh two pounds,” Melich said.

He said BJ’s would be better off focusing on stealing sales from regional and national supermarkets like Publix and Kroger.

“It would be a mistake for BJ’s to try to become Costco,” he said. “That’s not the point. The fact is there are a lot of people in a lot of markets who would like to buy things cheaper than they would at their local grocery store.”

BJ’s Werner said the company’s typical customer has an average household income between $75,000 and $100,000. He added that in the new markets BJ’s has entered, it has been able to attract members who already belong to another club.

Earlier this month, BJ’s said it expected modest growth for the full year. The retailer said it expects comparable club sales to increase 1% to 2% year over year, excluding gasoline sales. He said adjusted earnings per share would be between $3.75 and $4.00, with the lower end falling below the $3.96 reported for the most recent fiscal year.

As of Tuesday’s close, BJ’s shares had climbed more than 12% this year. This outperformed the S&P 500’s gains by more than 9%.

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