Citigroup, Inc (NYSE: C) Issues Research note on BJ’s Wholesale (NYSE: BJ), Costco (NASDAQ: COST) and Sam’s Club (NYSE: WMT)

Citigroup, Inc (NYSE: C) analysts issued a research note on Friday discussing BJ’s Wholesale Club (NYSE: BJ) Costco (NASDAQ: COST) and Sam’s Club (NYSE: WMT), suggesting that the saturation of the discount wholesale club market is more than a decade away.

Citi analyst says, “We believe the U.S. market can support 150 to 200 new clubs over the next decade, based on the findings of our warehouse club saturation analysis conducted with Fox Real Estate Advisory. The clubs remain under-represented in several large metropolitan markets, and many smaller metropolitan and micropolitan markets still await their first club store. Saturation could be pushed out well beyond ten years if the clubs continue to gain market share in food.”

“BJ’s Wholesale Club (NYSE: BJ): Growth Outlook — We believe BJ’s will be able to open ~41 new clubs over the next decade, which is below the company’s long-term square footage growth target of 5-6% (or ~10 new stores per year). However, BJ has been gaining market share in food retail (+28 bps in 2008), and the company is testing an 85,000 sq. ft. format that we believe it will use to enter micropolitan markets in the Northeast, Mid-Atlantic, and Southeast.

“Costco (Nasdaq: COST): Growth Outlook — Costco should be able to open ~92 new clubs over the next decade, which is below the company’s current expectations for ~16-20 new clubs per year in the U.S. We view Costco’s current real estate portfolio as a competitive advantage vs. its club competition. Its stores are located in high growth and high income markets, and we believe Costco has strong near-term growth potential in both existing markets where it is under-penetrated, such as Houston, TX, as well as new markets along the East Coast.”

“Sam’s Club (NYSE: WMT): Growth Outlook — Our analysis shows that Sam’s Club should be able to open ~55 new clubs over the next decade. We expect openings to remain below historical levels over the next five years (and potentially longer) as the company rolls out its Project Portfolio remodels (~50 remodels in progress currently). Additionally, we believe management will be focused on driving returns, rather than growing its store base, which is consistent with the strategy of its parent company (WMT).”