The private equity firms that own BJ’s Wholesale Club could be eyeing a sale of the membership-warehouse retailer or a potential public offering, according to a report in the Wall Street Journal.
Los Angeles-based Leonard Green and Partners and Luxembourg-based CVC Capital Partners acquired BJ’s from public ownership in 2011 for about $2.8 billion. At the time, reports emerged that Wal-Mart Stores, parent of BJ’s rival Sam’s Club, had also bid for BJ’s, but its offer was rejected.
It’s not clear what the prospects for a sale of the chain might be in today’s environment, when the major club-store chains, which also includes Costco Wholesale Corp., are under increasing pressure from Amazon and its Prime membership service.
More and more of BJ’s shoppers have been cross-shopping on Amazon, Timothy Campbell, an analyst at Kantar Retail, told SN, while brick-and-mortar competition is also increasing.
“The competition has become more intense,” he said, noting that Costco and Sam’s Club have been expanding within BJ’s regional base in the Northeast and Southeast. In addition, “limited-assortment discounters such as Aldi — and soon to be Lidl — also erode the uniqueness of BJ’s every-day-low-price value proposition by offering similarly low prices, and in a much smaller and potentially more convenient box,” he said.
BJ’s had been performing sluggishly in its first few years under private ownership, according to Kantar, but it has shown some signs of improvement under CEO Chris Baldwin, who took over last February with extensive experience in both the retail and CPG industries.
“We initially didn’t see the infusion of private investment and opportunity that we anticipated for BJ’s after the initial privatization,” said Sara Altukhaim, another analyst at Kantar.
The company had expanded its assortment broadly and strayed from the core club business model, she told SN.
In addition, plans to expand to new markets in the Midwest never materialized, Campbell said.
“Over the last year or so, however, it has begun to transform under Chris Baldwin’s leadership,” said Altukhaim. “A clearer strategy as a hybrid club/grocer has begun to emerge, and the retailer has made strides leveraging its membership data to drive insights and decision making.”
The company has sought to revive sales by focusing on five key pillars, Kantar said in a report last year: “smart saving families; improving value perception (including price leadership and private label); driving member engagement and retention; revitalizing the general merchandise assortment; and increasing its response speed by improving processes.
Campbell said that despite its efforts, BJ’s growth has been “slower, I think, than what they would want to see.”
“That being said BJ’s still has a strong core member base of loyal shoppers that ‘get the retailer’ and shop there for their grocery and household essentials stock-up trip regularly,” he said.
BJ’s operates 213 clubs and had estimated 2016-2017 food-and-sundries consumables sales of $9.6 billion, according to SN’s Top 75 list, an increase of about 2.1% over 2015-2016 consumables sales. In its last full year as a public company, BJ’s operated 189 locations, with sales — not including membership fees — of $10.6 billion.
It’s unclear what the market reception might be for a potential public offering, which would likely take place in the second half of the year, the Wall Street Journal reported.
“You could argue that a Sam’s or Costco would be curious [about buying BJ’s] given BJ’s stronghold in its trading areas and the real estate opportunity,” said Altukhaim. “But I’m doubtful that they are looking at investing in physical stores when the retail industry is moving away from that.”
Neither BJ’s nor Leonard Green & Partners could be reached for comment. CVC Capital Partners declined to comment.