BJ's Wholesale Club Inc. is exploring a possible sale of the company as its board assesses strategic options for the retailer, which saw same-store sales inch up January.


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Retail News Breaks

BJ's Wholesale may go up for sale

February 3rd, 2011

WESTBOROUGH, Mass. – BJ's Wholesale Club Inc. is exploring a possible sale of the company as its board assesses strategic options for the retailer, which saw same-store sales inch up January.

The warehouse club chain said Thursday that the board's move comes upon the recommendation of a committee of independent directors, which has hired investment banking firm Morgan Stanley & Co. as its financial adviser to assist in the process. A sale would involve taking the publicly traded company private.

"The company has not made a decision to pursue any specific strategic transaction or other strategic alternative," BJ's said in a statement, " so there can be no assurance that the exploration of strategic alternatives will result in a sale of the company or in any other transaction."

BJ's noted that it hasn't set a timetable and that it doesn't plan to provide updates or further comment on the effort unless the board and committee recommend a specific transaction or conclude the process.

The announcement that BJ's is mulling a potential sale, which sent its shares up around 13% as of noon trading Thursday, confirmed months of speculation by the investment community and retail industry observers that the company was already exploring such a move.

In July, private equity firm Leonard Green & Partners indicated that it was considering making a buyout offer for BJ's. The investment firm acquired a 9.5% stake in BJ’s and, in a Securities and Exchange Commission filing, stated that it believed the retailer's shares were undervalued and planned to contact management to discuss options, including taking the company private or finding additional financing. Then in November, published reports said BJ's was weighing plans to sell the company and had engaged Morgan Stanley to help set up an auction for the sale.

Just a couple of months later, in January, BJ's announced a management shakeup and plans to close five underperforming stores and restructure its home office and some field operations. The executive changes involved the appointment of a new chief financial officer and executive vice president of club operations, effective Jan. 30. Though BJ's didn't give details of job cuts at the time, one published report said the store closings and the home office and field operations restructuring would result in the elimination of nearly 500 jobs, including more than 100 at the corporate level.

BJ's same-store sales growth in recent months has generally trailed that of market leader Costco Wholesale Corp. With 189 warehouse clubs in 15 states, BJ's also is a much smaller operator than Costco, which operates 425 wholesale clubs in the United States and Puerto Rico plus another 80 in Canada and 32 in Mexico, as well as a combined 45 locations in the United Kingdom, Korea, Taiwan, Japan and Australia.

On Thursday, BJ's reported a comparable-club sales gain of 2.7% year over year for January. Merchandise comparable-club sales, which exclude the retailer's fuel business, edged up just 0.3% for the month. The company noted that severe snowstorms in the Northeast and Mid-Atlantic had a 2.5% negative impact on merchandise comparable-club sales.

Costco, meanwhile, reported a 6% increase in comparable-club sales in the United States for January. Excluding the impact of gasoline inflation, the retailer's January same-store sales were up 4% in its U.S. club business.

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