Falling gasoline prices may be hurting sales and profits at BJ's Wholesale Club Inc. (BJ), but the discount warehouse chain is attracting more weekly shoppers with its focus on perishable groceries and other everyday basics.

"Our goal is to be the first stop for food sales, with supermarkets being used for fillers," or items that shoppers couldn't find at BJ's, said Chief Executive Laura Sen during a conference call Wednesday. "The real story is about getting the weekly grocery shopping."

BJ's said it plans to use higher margins from its strong perishables business, which saw a same-store sales increase of 13% in the fiscal fourth quarter, to keep prices competitive in other areas of its stores in the current fiscal year.

The Natick, Mass., retailer hopes that will boost store traffic enough to help increase sales excluding gasoline by 5% to 7% at comparable stores in fiscal 2009. Meanwhile, inflation, lower consumer spending on higher margin, discretionary items because of the weak economy, and tough price competition means margins will likely be flat, executives said.

BJ's revised its earnings expectations for the new fiscal year to $2.26 to $2.36 a share, from November's estimate of $2.27 to $2.39.

Discounters and wholesale clubs including BJ's and Wal-Mart Stores Inc. (WMT) have been retail's strongest performers of late as the economic downturn has prompted shoppers to stock up in bulk and seek out bargains. Sales at department stores and specialty retailers have been lagging, in part because of their bigger exposure to discretionary merchandise.

BJ's shares recently traded up 7.5% at $29.51.

For the period ended Jan. 31, BJ's posted net income of $52.7 million, or 91 cents a share, up from $50.2 million, or 80 cents, a year earlier. The 5% increase in earnings benefited from 2 cents a share in tax gains. In November, the company said it expected earnings including items of 86 cents to 90 cents.

The company reported last month that quarterly revenue increased 3.2% to $2.56 billion as same-store sales rose 1.7%. Falling gasoline prices put a big hit on sales, with same-store sales excluding gasoline up 6.4%.

Food items posted an 11% comparable-sales increase, and the strong growth in perishables also helped offset weaker sales in more discretionary items like apparel and jewelry. General merchandise sales were flat.

"All factors being considered, BJ's had a very solid holiday quarter, with sales and earnings results that towered over that of other retail discounters," Wall Street Strategies analyst Brian Sozzi said in a note to clients.

Improved merchandise selection and tight control over operating expenses helped operating margin for the full year expand three basis points, "which is nothing to scoff at when observing broader sector trends," Sozzi said.

February comparable-store sales edged up 0.6% as falling gasoline prices offset an 8.2% increase in same-store merchandise sales, the retailer also reported Wednesday.

BJ's had posted seven straight months of double-digit growth in same-store sales through October, in part because of then-higher gasoline prices, but it struggled in December, typically a strong month with holiday sales. Retailers of all kinds saw their worst holiday season ever last year.

Indeed, Costco Wholesale Corp. (COST) on Wednesday reported second-quarter results that were worse than implied by the company's guidance in February, Sozzi said. "As previously conveyed by management, Costco was forced to reduce prices in both food and non-food categories to remain competitive and clear inventory," he said.

Costco's net income fell 27% as same-store sales fell 3% amid falling gasoline prices and a hit to international sales results from the strengthening of the U.S. dollar against other currencies.

Costco shares were up 0.2% at $40.75 in recent trading.

 
   (Kerry E. Grace contributed to this report.)

-By Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145; maryellen.lloyd@dowjones.com