There's no doubt that many American consumers and businesses are going through a rough patch at the moment. For warehouse clubs, however, the weak economy has proven to be something of a boon as savings minded consumers look for the low unit prices that come with buying in bulk.
Georges Yared, of Yared Investment Research, may have stated the obvious when he told BusinessWeek that warehouse clubs "become more attractive [as] consumers become more price-sensitive."
Costco, Sam's Club and BJ's all reported strong sales and profit results this week.
Costco saw same-store sales climb seven percent last month while BJ's experienced a 5.9 percent increase. Sam's same-store sales were up 2.8 percent.
The high cost of gas has worked in favor of the clubs that sell fuel, critics contend, at loss leader rates. Offering low prices at the pump brings consumers to warehouse club lots and eventually inside the stores to shop for food and other items.
Costco's and BJ's numbers indicate that consumers are looking to buy the basics and are staying away from more extravagant purchases. Both chains indicated that consumer spending was down in categories such as housewares, appliances, furniture and jewelry.
Discussion Questions: Do you expect that warehouse clubs will continue to perform well should the economic conditions stay the same or worsen? Will consumers continue to shift their dollars to warehouse clubs after the economy has rebounded? What do you see as the relative strengths/weaknesses of the three warehouse club chains during a down economy?