Price Club’s Lackluster 2nd Quarter Is a Surprise

Price Co., the San Diego-based operator of 47 Price Club membership warehouses, announced lackluster sales and earnings for the second quarter ended March 18. The company reported a profit of $25.9 million on sales of $1.093 billion, up from the profit of $25.6 million on sales of $1.035 billion reported for the same quarter a year ago.

The 1.3% increase in profit and 6% increase in sales came as something of a surprise to those grown accustomed to the double-digit increases that have been the norm for most quarters since the discount chain was founded in 1976. Same-store sales at Price Clubs, or those at warehouse open at least a year, decreased 2.2% from last year.

In an interview, Price Co. chief executive Robert Price said the figure was affected by the fact that the recently ended quarter was one week shorter than the comparable period a year ago, when the company was in the process of shifting its fiscal year forward by one week.

Also, sales at many existing Price Clubs are approaching maximum levels, making compounded sales growth more difficult, he said.

But analysts noted that, even with an extra week added to the second quarter sales period, Price’s results were disappointing contrasted with past years. Bo Cheadle, a retail stock analyst with Montgomery Securities in San Francisco, said Price’s profit was 2 cents per share less than he expected and that growth has been hurt by competition.

“I don’t think it’s because Price is doing anything less well than what it’s done in the past, but that companies like Costco and Price Savers are much better merchants than they were two years ago,” Cheadle said.

Price also announced plans Monday to increase the number of Price Clubs by 25% over the next year or so, a move that analyst Sarah Stack of Bateman Eichler, Hill Richards found encouraging because it will mean a corresponding increase in overall sales volume.

“A majority of their East Coast openings are still ahead of them, so they are at the beginning of what I believe will be a multi-year, accelerated expansion” in markets with less competition than the hotly contested West Coast, Stack said.