Analysts: "There's a very legitimate case for it being sold -- they're not big enough to compete with the Sam's and Costcos,"

BJ's Getting Out of Pharmacy Biz

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By George Anderson

BJ's Wholesale Club has decided to close all of its pharmacies.

The decision to get out of the pharmacy business was made, according to interim CEO Herb Zarkin, for a number of reasons. These included the company getting into pharmacy at a later stage (2002) than its primary competitors and not having conveniently located stores (46 of BJ's 171 stores have a pharmacy) to make it easier for consumers to pick up their prescription medicines.

"We haven't seen the [prescriptions] grow on a regular basis," Zarkin said. "It just didn't make a lot of sense for us to keep on putting the investment in."

BJ's has also felt the effect of increased price competition, which started when Wal-Mart began pricing some older generics at $4, as well as dealing with reduced reimbursement rates from Medicare.

The announcement BJ's is shuttering its pharmacies is likely to increase speculation of a company sale.

"There's a very legitimate case for it being sold -- they're not big enough to compete with the Sam's and Costcos," David Strasser, an analyst with Bank of America Securities, told the Boston Globe.

A BJ's spokeswoman said the company would not comment on the decision to disband the pharmacy. But in a conference call with investors last week, interim CEO Herb Zarkin said BJ's prescription business wasn't growing.

"It just didn't make a lot of sense for us to keep putting the investment in," he said.

Zarkin replaced Michael Wedge, the architect of BJ's plan to build pharmaceutical sales by offering a variety of medications at prices up to 20 percent lower than drug stores.

BJ's also entered the e-commerce fray in December, allowing nonmembers to shop online for such goods as plasma televisions and electronics. BJ's publicized the effort by offering a 41-carat diamond necklace, priced at $250,000.

But jewelry sales failed to dazzle in the fourth quarter, which Zarkin attributed to poor staff training.

"You just can't put a body there," he said. "You have to train them."

BJ's operates 171 stores in 17 states, 46 of them with pharmacies. In addition to Deptford and Voorhees, the retailer also operates stores in Maple Shade, Mays Landing and Vineland. We don't know what's exactly in store for BJ's, but we do know that the workers should keep their eyes and ears open for anything, this is a very trying time for BJ's Wholesale Club...