In his first public remarks since taking the reins as CEO and president of BJ’s Wholesale Club, Lee Delaney had a simple message: “We must grow faster.”
Delaney, who officially took over for Christopher Baldwin in a planned transition this week, addressed investors as the Westborough, Mass.-based club retailer reviewed fourth-quarter financial results showing a same-store sales increase of 0.3% and revenues of $1.4 billion, a modest 1.5% increase.
Delaney, who previously was president of BJ’s, has been behind many of the transformation efforts that have built slow-but-consistent sales and earnings growth at BJ’s but said slower growth in the second half of 2019 indicated a need for a more aggressive stance. To that end the company has embarked on a $100 million, two-year cost-reduction initiative that Delaney said would fuel more aggressive investment in areas in which it can grow.
The initiative, known as “Project Momentum,” includes a realignment of its organization to support strategic initiatives and remove duplicative work. Investment capital generated from the savings will help to grow omnichannel capabilities; attract and retain a quality membership base, including younger shoppers; and revamp assortments to offer more trend-right items while reducing assortment and choices in center-store grocery categories, Delaney said.
“We made these decisions from a position of strength, and the savings will enable us to invest more aggressively behind growth opportunities,” he said, according to a Sentieo transcript. “Our investments will be disciplined, growth-oriented and anchored in our strategic pillars: to acquire and retain members, deliver value to keep them engaged, make it more convenient and expand our reach.”
BJ’s stores carry about four times the assortment in categories such as pasta sauce and deodorants than other club retailers but is under-assorted in natural organic, nutrition foods and plant-based items, Delaney explained.
“The key question is, how do we find space to carry all these exciting new products and services? The good news is we offer way more choice in center store grocery categories than our members need,” he said. “This extra choice does not fuel growth and leaves us overdeveloped in declining and nonproductive categories.”
The revamped assortments, which are being piloted in some clubs now, will support BJ’s pursuit of younger members.
“And when we talk younger, we’re not talking people in their 20s,” Delaney noted. “Our business starts to make sense when you buy a home, when you have kids, when you have a real need to buy in larger quantities. And so as you think about acquiring that recent new homeowner or recent … family creation, you have great long-term value. And the key to that cohort is making sure you have the relevant merchandising and so that is increasingly organic, healthy, broad-based items.
“It is offering the appropriate omni-services and making sure people are aware of that—making sure that people are aware that BJ's offers those and they are a great set of services. And then it’s offering personalized marketing. And so we feel like we’ve built all of the tools to successfully target someone kind of in their mid- to late 20s and 30s and roll them in the franchise, and that will drive great things for us the long-term because you have more shopping years ahead than if you acquire someone a little bit later in life. And so we're kind of coming at it in a multifaceted way. But skewing younger is great for the franchise because of the lifetime value of the members.”