Discount club retailers BJ's Wholesale Club Inc. (BJ) and Costco Wholesale Corp. (COST) showed Wednesday they're willing to sacrifice some profits in order to secure more business with thrifty shoppers during the economic downturn.

Results from both companies in the latest quarter reflected price cutting - in some cases even before their own costs have come down commensurately.

BJ's Chief Financial Officer Frank Forward said the main difference between the company's fiscal 2009 earnings guidance Wednesday and its November view lies in the margin.

BJ's expects merchandise margin to be flat for the year rather than modestly higher as it expected in November, he said. Margin benefits BJ's may get in its growing perishables business, for example, can be used to lower prices or offset inflation in other products.

BJ's doesn't intend to be on the offensive with its pricing strategy, Chief Executive Laura Sen said. "Our goal is to be competitive and make sure our value proposition overall is there for our members," she said.

And while Costco has stopped providing earnings guidance, Chief Financial Officer Richard Galanti made clear his priority.

"We're prepared to sacrifice margin if comps are going in the wrong direction," he said.

Costco said it believes earlier moves to keep prices competitive have helped keep membership renewal rates at an all-time high. And it is also increasing the frequency with which its members visit stores.

"While our members are buying a little less each visit, they're coming in more frequently," he said.

For the quarter ended Feb. 15, Costco posted net income of $239.7 million, or 55 cents a diluted share, down from $327.9 million, or 74 cents a share, a year earlier. Costco's revenue declined to $16.84 billion from $16.96 billion a year earlier as same-store sales fell 3%. Excluding gasoline price deflation and foreign currency effects, same-store sales would have increased about 5%, Galanti said.

Costco cut prices on milk, cheese, butter and other products when it saw commodity prices were coming down quickly but before its suppliers has passed along savings. "I'm sure someone can show if we didn't lower our prices we could've made extra dollars, but when I see the frequency, loyalty and underlying sales growth, we think that's the right thing to do," he said. "We're trying to lower prices and raise margins."

BJ's emphasis in stores on basic grocery and perishable food items seems to be giving it somewhat of an advantage over Costco's more wants-based and bigger-ticket merchandise lineup, which includes items such as furniture and $900 signed, original artwork.

"Costco appears to be playing catch-up from the perspectives of merchandise prices and general merchandise content, which is unwelcome in a volatile retail environment," said Wall Street Strategies analyst Brian Sozzi, who has a sell rating on Costco shares.

BJ's, which operates 180 stores in 15 states, posted a 5% increase in fiscal fourth-quarter net income as same-store sales rose 6.4% excluding gasoline and 1.7% overall.

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.

It expects full year earnings of $2.26 to $2.36 a share on a same-store sales increase of 5% to 7% excluding gasoline. BJ's in November estimated full-year earnings of between $2.27 and $2.39 a share.

Shares of BJ's recently traded up 8.3% at $29.70 and are down 13.4% so far this year. Costco shares recently were unchanged at $40.69 but are down 22.5% for the year. The S&P 500 has lost 20.4% so far in 2009.

BJ's February trends were also better than Costco's.

Excluding gasoline, BJ's February sales at comparable stores increased 8.2%, with food sales up 10% and general merchandise sale improving 4%. The company said breakfast foods, candy, deli, frozen foods, health and beauty aids, household chemicals, meat, paper, produce, television and video games were among strongest departments. Weaker departments included apparel, jewelry and sporting goods.

Costco said February U.S. same-store sales excluding gasoline were up 4%. International sales were up 6% on a same-store basis, excluding the negative impact of foreign exchange. Companywide same-store sales fell 3% including gasoline and foreign exchange effects.

Grocery, dry goods and televisions were strong categories recently, Costco said.

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