Sam's Club Closings Shows Its Lag Behind Costco, BJ's

Last Updated Jan 13, 2010 7:57 PM EST

There is do doubt that Walmart (WMT) is one of the few retailers winning in the recession, as consumers flock to discount stores in search of lower prices. One of its concepts, though, membership-club warehouse chain Sam's Club is surprisingly under performing.

Walmart recently announced that it will close 10 of its Sam's Clubs stores across the country, leaving it with just under 600 stores in the chain. These locations are losing money, said Brian Cornell, president and chief executive officer of the chain, and the closures will lead to the termination of 1,500 employees that can try to fill openings at other Sam's Club and Walmart locations.

The move highlights a reality facing Sam's Club -- it is not performing quite as well as its two main competitors, Costco Wholesale (COST) and BJ's Wholesale Club (BJ). Excluding fuel, sales at Sam's Club stores open at least a year crept up 0.1 percent during the third quarter. By contrast, same-store sales in Costco's most recent quarter rose three percent excluding fuel, and BJ's shot up 3.9 percent.

Meanwhile, as Sam's Clubs pares back its stores, Costco is upping its expansion plans. Management plans to open between 16 and 18 new units in the current fiscal year and increase that number to the low 20's next year and in 2012. BJ's plans seven new locations this year, according to a recent investor presentation.

Like it does with its competitors in the discount-store arena, Sam's Club's 600 stores in the US dwarf its two main wholesale club rivals. While it is a national chain, Costco only operates just over 400 stores in the United States. BJ's, still mainly and East Coast player, doesn't even yet run 200 clubs.

There could be too many Sam's Clubs out there and too many choices for the consumer.

In some cases, some of the Sam's Clubs that are closing might be too close to regular Walmart stores. The Sam's closing in Napa, Idaho, is less than half a mile from a Supercenter. Additionally, it is just five miles away from a Costco, probably not a time-consuming drive in a locale such as Nampa. Additionally, the Sam's closing in Louisville, Colo., is not even three miles north of a Costco. In La Quinta, Calif., the Sam's closing is literally next door to a Supercenter.

Consumers lately are clearly choosing Sam's Club's competitors in today's marketplace. If they continue to do so, we might see more store closings by the warehouse chain, while the company's namesake stores continue to thrive.