By  on February 2, 1994

NEW YORK -- The warehouse club industry has taken it on the chin in the past year, with consolidations, closings and clipped sales. Yet industry leader Sam's Club continues to spread across the country and generate gains.

Warehouse clubs are bare-bones retailers -- no fancy fixtures in the cavernous stores, usually just boxes of multipack merchandise hauled out on skids. There is little to differentiate one club from another. Sam's secret, say analysts and observers, is in the organizational clout that its parent, Wal-Mart Stores of Bentonville, Ark., is famous for.

The field of major national players in the club business has dwindled to two from five in the past year, and industrywide sales have paled from the rosy double-digit growth -- often surpassing 20 percent -- in 1990 and 1991, to troubling low-single-digit growth of under 5 percent or, in some cases, negative comparable-store sales.

Last month, Sam's gobbled 91 of Kmart Corp.'s Pace Membership Clubs; last May, it bought 14 Pace units. Kmart closed its remaining 22 Pace units on Dec. 24 and is now out of the club business.

The other national powerhouse is Price-Costco, which was formed when warehouse operators Price Co. and Costco merged. The company has about 210 stores, generated $16 billion in sales last year, and poses a significant challenge to Sam's, which by itself had sales of about $15 billion in 1993.

Including the Pace acquisition, Sam's operates more than 400 clubs, and sources say plans call for an additional 20 to 25 new sites this year.

According to a Salomon Bros. research report on Wal-Mart, sales at Sam's are expected to rise to about $22 billion in 1994.

Sam's did not respond to a request for an interview.

Since the Price-Costco merger, BJ's Wholesale Club, owned by Waban Corp., Nattick, Mass., is left as the next largest competitor, with 52 clubs. But it is a regional operator, concentrated in the Northeast. Another regional operator, which got out of the club business by closing its seven SourceClub units last month is Fred Meijer Inc., Grand Rapids, Mich. A spokesman said Meijer "saw the warehouse industry wasn't what it was two years ago, having gone to two major companies, so we decided to focus our energies on our full-line stores."

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