Retail News Breaks
BJís explores strategic options
November 10th, 2010
NEW YORK – BJ’s Wholesale Club Inc. is weighing plans to sell the company, according to a Bloomberg report citing people with knowledge of the situation.
The membership warehouse club operator has reportedly hired Morgan Stanley to help set up an auction for the sale.
In July private equity firm Leonard Green & Partners LP acquired a 9.5% stake in BJ’s and, in a filing with the Securities and Exchange Commission, stated that it believed BJ’s shares were undervalued and planned to contact management to discuss options, including taking the company private or finding additional financing, potentially through mortgage financing or sale leaseback transactions.
The Los Angeles-based buyout firm has stakes in such retailers as Whole Foods Market Inc., Rite Aid Corp., and Petco Animal Supplies Inc.
BJ’s share price rose $4.61, or nearly 11%, to $46.64 by midday Wednesday.
In August management revised its full-year earnings and sales guidance downward after second-quarter net income grew 2% and fell short of the consensus estimate of analysts surveyed by Thomson Reuters. However, while the results of its income statement fell short of expectations, the company more than doubled its cash and reduced its long-term debt to a mere $220,000, boosting its attractiveness to possible buyers.
In recent months same-store sales growth at BJ’s has generally trailed that of competitor Costco Wholesale Corp., the top performer in the warehouse club trade class.
Some analysts hypothesize that by going private, BJ’s could invest in expansion that would have too great an impact on its bottom-line results as a public company. After expanding its footprint and increasing its share in its current markets, it could then be taken public again.
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