Price Club Profits Rise; New Stores Are Credited
Price Co., the San Diego-based operator of 38 Price Club discount warehouses, reported a 27% increase in second-quarter profits Thursday and a 24% increase in sales.
The sales hike was due mainly to the opening of 11 additional Price Clubs over the last 12 months. Same-store sales, or revenue at Price Clubs open a year or more, increased only 3% over the quarter ended March 13, down from an 18% gain in same-store sales over the second quarter last year.
The decrease in same-store sales-growth rate, part of a steady yearlong downward trend, is a sign of increasing “cannibalization” of Price Club’s discount-warehouse business, especially in Southern California, by competitors and by additional Price Clubs, analysts say.
Net income for the quarter was $21.1 million, up from $16.7 million last year. Second-quarter sales were $842.6 million, up from $678.7 million for the year-ago quarter. For the year to date, Price posted a profit of $52 million, up 32% from last year’s $39.5 million, while sales of $2.1 billion were up 24.3% from $1.7 billion over the same two quarters a year ago.
Despite the cannibalization, analysts said that Price’s ability to maintain earnings growth in in the face of high start-up costs for its new stores was significant. “Price is still the standard by which everyone else in the industry measures their performance,” said Richard Pyle, a retail analyst with Piper, Jaffray & Hopwood investment firm of Minneapolis.
“They seem to be chugging along,” Pyle said. “Even with the added competition, Price Co. still has the best volume per store in the industry by a factor of 2 1/2 times.”
Price Co. stock closed down $1.375 at $37.125 per share in over-the-counter trading.
A spokesman said no new Price Club openings are scheduled for this quarter but that as many as three additional warehouses will be opened during the fourth quarter ending Aug. 31. The new locations will be in Glendale, Ariz.; Corona, Calif., and Hampton, Va. Sometime this fall, Price plans to open another store in Babylon, N.Y., the chain’s second Long Island site.
Price Club Canada, a joint venture with Steinberg Inc., in which Price is a 50% partner, plans to open additional stores in Toronto and Quebec City this fall, bringing to four the number of Canadian Price Clubs.
