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NATICK, Mass. (

TheStreet

) --

BJ's Wholesale's

(BJ) - Get BJ's Wholesale Club Holdings, Inc. Report

lead among its competition is narrowing, as gasoline prices and food deflation sent its second-quarter profit down 4%.

During the quarter, the company earned $35.1 million, or 64 cents a share, compared with $36.5 million, or 61 cents, in the year-ago period. Analysts expected earnings of 62 cents.

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Last year's results were boosted by a $2 million income-tax settlement that added 3 cents a share; there were also fewer shares outstanding in the current quarter.

Sales dropped 5% to $2.51 billion from $2.64 billion, weighed down by lower prices at the gas pump. Total same-store sales sank 7.7%, but excluding gasoline actually jumped 2.9%.

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BJ's has managed to fare better than some of its competitors by focusing on food products. As shoppers stuck to basics during the beginning of the economic downturn, this approach was working. But food deflation has now softened the wholesaler's gains.

And analysts do not expect the company to be able to recover from these road blocks in the near-term.

Last week J.P. Morgan analyst Charles Grom downgraded the company to neutral from overweight, saying BJ's may not be able to overcome declining food prices. He expects same-store sales to continue to suffer in the second half, but did note that traffic is growing.

BJ's upped its full-year earnings to the range of $2.46 to $2.56 a share, from a prior forecast of $2.44 to $2.54 a share.

Shares of the company grew 1.5% to $31.77 in morning trading.

Rival

Costco Wholesale

(COST) - Get Costco Wholesale Corporation Report

will report its earnings report on Oct. 8.

-- Reported by Jeanine Poggi in New York.

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