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Tickers in this Article: BJ, COST, MS, SAKS, M, JCP, BIG
BJ's Wholesale Club (NYSE:BJ) edged forward with slight sales gains for its fourth quarter and fiscal year, though the results were overshadowed by the possible sale of the company.

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BJ's Position
BJ's has lagged its competitor Costco (Nasdaq:COST) in sales growth, and although the company hasn't explicitly stated it, a sale of BJ's is possible. The company hired Morgan Stanley (NYSE:MS) to guide it through a study of strategic alternatives, which likely includes consideration of a sale. In November, private equity investor Leonard Green, which had taken a 9.5% stake in BJ's in July, offered to take BJ's private.

BJ's Results
BJ's earned 95 cents per share in its fourth quarter, excluding items, versus 94 cents in last year's quarter. Non-GAAP adjusted net income was $51.3 million compared to $51 million in the year ago quarter. The quarter's net sales, which excludes membership sales and other revenue, rose to $2.9 billion from $2.7. Excluded earnings items included charges for restructuring and impairment charges, which include club closures.

Comparable club sales rose by 3.8%; excluding gasoline sales, 1.7%. Despite snowstorms in the northeast, traffic increased by 2% for the quarter while the average transaction was flat. For the full year, adjusted EPS was $2.53 up from $2.46 the previous year, and net income of $136.1 million compared to $134.7 million on net sales of $10.63 billion, an increase from $9.8 billion.

Wholesalers, Discounters, Gasoline, the Economy
With rising gasoline prices, retailers of all stripes are, and should be, nervous. The economic recovery, which has taken small steps, could eventually be derailed by a long, grinding rise in gas prices. Even luxury retailers such as Saks (NYSE:SAKS) may be hurt, but certainly mid-price department stores such as Macy's (NYSE:M) or JC Penney (NYSE:JCP) could have their revivals threatened.

Discounters and dollar stores, however, may be in a better position. Closeout king Big Lots (NYSE:BIG), also possibly for sale, might do better - as should Costco and BJ's - in the event of another economic slowdown. Costco and BJ's offer discounts on gasoline, putting them in a unique retailing position during potential downturns, especially one where gas prices are central.

BJ's Near-Term Prospects
Whether the company is sold sooner, later or not at all, BJ's near-term prospects appear solid. BJ's raised its annual membership fee in January by $5 to $50. Same-store sales for February, the first month of its first quarter and fiscal year, rose by 5.5%.

Discounters, wholesalers and dollar stores argue that value now will always have a place in retailing. So far in the initial stages of economic recovery, they have been correct. BJ's forecast fiscal year earnings of $2.62 to $2.82 per share. The company plans to open six to eight new clubs this year. With 103 of its 190 locations offering discounted gasoline, this can also be a membership driver for BJ's. Given BJ's outlook, should a company sale not occur and share prices pullback, BJ's could be an intriguing investment. (For related reading, also take a look at Analyzing Retail Stocks.)

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