BJ's Wholesale Club (NYSE: BJ - option chain) stock is trading lower today after the company reported its same-store sales slipped 0.5 percent in September. Analysts were expecting a 1 percent decline, but traders saw competitor, Costco (NASDAQ: COST) post a 1% rise in September same-store sales and wanted more from BJ. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BJ.

This morning, BJ opened at $35.90. So far today the stock has hit a high of $36.13 and a low of $35.90. As of 11:20, BJ is trading at $36.10, down 96 cents (-2.6%). The chart for BJ looks bullish and S&P gives BJ a positive 4 STARS (out of 5) buy ranking.

In a distinctly depressing sign of the times, BJ's Wholesale Club, Inc. (NYSE: BJ) announced today that it will begin accepting food stamps as payment at all 180 of its retail locations. Food-stamp payments will be processed through the Electronic Benefit Transfer (EBT) system.

"BJ's recognizes the diverse financial status and changing needs of its members," commented president and CEO Laura Sen in a statement. "We are proud to help members stretch their food budgets by offering savings on a large selection of fresh fruits, vegetables, meats and baked goods, along with name-brand, non-perishable staples."

Costco (NASDAQ: COST), a warehouse club that competes with BJ's Wholesale Club (NYSE: BJ) and Wal-Mart (NYSE: WMT), reported earnings for the second quarter on Wednesday. The company experienced a significant drop in the bottom line. Costco earned 54 cents per share on a diluted basis. That represented a decline of 26%. Analysts thought that 59 cents per share was doable. It wasn't. Net sales dropped 1%. Excluding gasoline and currency effects, same-store sales went up by 5% overall during the quarter (including those items, comps declined 3%).

Well, now, what does this tell us about Costco? It tells us that the whole thesis that people will be looking to save money by shopping at warehouse clubs doesn't necessarily translate into a successful earnings picture. Hey, what can you do? We're in a grand recession. And it's getting worse. Of course, it should be noted that Costco management must strive to work even harder to get people to spend more money in their stores. In fact, BJ's did pretty well with its numbers: Costco's competitor beat the analysts, even after adjustments.

Costco Wholesale Corporation (NASDAQ: COST) didn't have the greatest first quarter on record. On a reported basis, earnings per share on a diluted basis rose a penny to $0.60. A single, sad, solitary penny. But, let's go non-GAAP, shall we? If we add back $0.05 relating to the mark-to-market effect of some life insurance contracts, we get $0.65 per share, which, according to this article, means that Costco beat earnings estimates by $0.03.

That's not bad, actually, although the market wasn't impressed. As I write this, the stock is down over 2.5%. While the top line increased 3.7% to $16.4 billion, same-store sales expanded by a smaller amount. And, as we all know, same-store sales are the big thing when it comes to gauging the relative health of a retail operation with multiple store locations (although many pundits do argue that you shouldn't go overboard in terms of focusing on comps). Costco saw its comps rise by a mere 1%. And, interestingly enough, I noticed in the press release that the effect of a stronger dollar made itself known to the company during the quarter. There's been a lot of talk lately about how the fluctuating currency markets would eventually impact businesses with foreign exposure. Considering that we're a global economy, every individual investor must keep this in mind.

So, Costco, which competes with BJ's Wholesale Club (NYSE: BJ) and Wal-Mart Stores, Inc. (NYSE: WMT), did okay for the quarter in terms of earnings, but comps are a different matter. Management said that non-food categories were weak. Not surprising, considering that foodstuffs are, in theory, the defensive business in a bad spending environment. Costco will have to address that through better merchandising. As for the stock, I agree with Elizabeth Harrow that it could be cheap. If you've got a very long-term horizon, you should be okay with this company, but traders would be advised to use a tight stop on it. I could see this one going down from here, at least in the short-term, based on the weak comps.

Disclosure: I don't own any company mentioned; positions can change at any time.

BJ's Wholesale Club (NYSE: BJ - option chain) shares are falling today despite reporting second-quarter profit that beat estimates and announcing a share buyback. This is possibly because discretionary item spending slowed. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on BJ or similar companies like COST.

This morning, BJ opened at $38.60. So far today the stock has hit a low of $37.11 and a high of $38.98. As of 12:45, BJ is trading at $37.99, down $2.69 (-6.6%). The chart for BJ looks neutral and S&P gives BJ a neutral 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in two months as long as BJ is below $45 at October expiration. BJ's would have to rise by more than 18% before we would start to lose money.

BJ hasn't been above $45 at all in the past year and has shown resistance around $43 recently.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in BJ.

Some of the country's largest retail chains had good June sales, benefitting from consumers looking for a place to spend their tax rebates, but this was not the case for higher-priced department stores. Retailers offering big discounts were among the privileges ones as consumers chose to stay away from high prices.

Consumers spent on the basics, looking for bargains, boosting sales at some companies like Wal-Mart (NYSE: WMT), but resulting in losses for the others like Nordstrom (NYSE: JWN) and American Eagle (NYSE: AEO). This confirmed that retailers will face further weak demand even during the back-to-school shopping season, and more deep discounts will be needed.

As June is considered a key month for sales, merchants were hoping for a "stimulus" effect from tax rebates, despite worries tied to soaring gasoline and food costs. However, only companies offering cheaper gas like Wal-Mart, Costco (NASDAQ: COST) and BJ's Wholesale Club (NYSE: BJ) saw their dreams accomplished. Thus, Wal-Mart came with June sales growth of 4.3%, Costco reported a 9% increase in June same-store sales, while BJ's Wholesale saw a growth of 16.5%.

The Wall Street Journal reports that BJ's Wholesale Club (NYSE: BJ) reported a 26% rise in net income. Its earnings of 29 cents a share beat analysts' expectations by a penny. And as consumers go on their crash recession diet, BJ's is likely to continue to exceed expectations. I would not be surprised if its stock keeps rising.

That's because results are growing faster than had been expected. The Journal reports that BJ's revenue climbed 12% to $2.31 billion. Earlier this month, BJ's said net sales increased 12% to $2.26 billion, as same-store sales rose 9.6%, with gasoline sales contributing 3.9 percentage points to the rise. And BJ's raised its EPS guidance by six cents to $2.04 to $2.14 a share. The mean estimate was $2.06 a share.

BJ's joins two beneficiaries of consumers' recession diet -- Wal-Mart Stores (NYSE: WMT) and TJX Co's (NYSE: TJX) -- caused by the rising price of gasoline coupled with flat income and collapsed housing values. After all, if you can't borrow against your house and your credit cards are maxed out, where are you going to turn to keep your family functioning?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.