(NECN: Peter Howe, Natick, Mass.) Two big Massachusetts retailers, Shaw's and BJ's Wholesale Club, announced they are both closing five stores apiece in coming weeks -- evidence that six months after the recession was declared over, retailers are still fighting to cut costs, blot up red ink, and boost profits.
The moves comes on the heels of TJX announcing plans to fold the AJ Wright brand, costing 4,400 jobs, and Macy's stunning announcement Tuesday it will shut down its decades-old store in upscale Chestnut Hill, Massachusetts, one of the most affluent areas of suburban Boston.
Shaw's said it is closing money-losing supermarkets in New Bedford, Stoneham, and Revere, Mass., and Johnston and Warwick, R.I. Shaw's didn't say how many people will be fired but said it hopes many workers will be able to get jobs at other Shaw's and Star supermarkets in the region.
BJ's is closing stores in Atlanta, Charlotte and South Florida -- none of its 46 stores in five of the six New England states. However, BJ's said as part of the move it is eliminating 61 jobs at its Natick headquarters, and 53 in field operations in multiple states. A total of 380 people who work at the five stores being closed will also lose their jobs.
BJ's CEO Laura Sen issued a statement saying in part: "Our management team has been working for several months on a strategic plan to optimize our performance and build for the future, thereby enhancing shareholder value. The five clubs to be closed have historically underperformed and, after careful consideration, we concluded that improvement of their operating results was unlikely. The savings associated with the actions we are announcing today will be invested in new clubs, remodels, and information technology, all of which are vital to our competitiveness, future growth and profitability. We remain committed to the Atlanta, Charlotte and South Florida markets and will look to expand in those markets.''
With 194 stores in 15 states from Maine to Florida, BJ's ranks as a distant third to national-footprint Sam's Club, a WalMart subsidiary, and Costco. It has 23,000 employees. Annual sales are projected to exceed $10 billion in the fiscal year ending later this month, but BJ's is forecasting net income of only around $135 million, a net income margin of less than 1.4 percent.
Brendan Langan, director of retail insights with Kantar Retail in Cambridge, Mass., said he thinks the BJ's move is smart -- and necessary -- corporate strategy. "I very much think this is the first step in the right direction, really to invest in their best stores and to free up some capital in their existing locations but also to accelerate growth in other markets.''
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"We're looking at retailers tightening their belts and looking at their portfolio of stores to say, 'All right, where are our best locations? What are our best formats? And let's invest in those,' '' Langan said. He noted that Sen's emphasis on information-technology upgrades is crucial because of rapid progress Amazon.com has made as a credible, cost-competitive source of products like diapers, health and beauty aids, laundry detergent, and other higher-cost household products that are the bread and butter of warehouse-club markets.
Back in November, it was reported BJ's had hired investment bankers Morgan Stanley to explore strategic alternatives -- Wall Street-speak for putting itself up for sale, either to a private-equity firm or potentially a rival chain looking to bulk up its Eastern Seaboard presence.
We talked to shoppers at the BJ's in Framingham, Mass., about how they think the store could improve itself. Cecelia Lyttle, a Framingham resident who buys in bulk at the store four or five times a week, said she'd recommend "an update on the store to kind of give it a little facelift and you know just improve" the atmosphere, which she said now feels old and tired. She also said she thinks many of the store employees don't dress professionally and "kind of ignore you somewhat. But on the whole, it's a good store, and you can't beat the prices.''
Someone who completely agreed with that last sentiment was Bill Campbell, owner and CEO of Total Connections, a Framingham answering service and information technology provider. He was at the store loading up on $286 worth of snacks and drinks for his employees.
Campbell said as he thinks about BJ's, they could "maybe do a better job advertising. But I think their product mix is good, and their prices are very good, very competitive.''
While store closings and layoffs are exactly what companies typically do to make themselves more attractive takeover candidates, BJ's got no immediate bounce out of the announcement Wednesday. Shares were down $1.04, or 2.2 percent, as investors seemed much more focused on the fact that year-over-year growth in crucial December sales at BJ's fell 0.6 percent below what most analysts were forecasting.
With videographer Bob Ricci
