IPOs

BJ’s Wholesale Plans Return to Public Market

The warehouse club's timing could be good as "investors are a bit more confident with retail now than they have been in the past."
Matthew HellerMay 18, 2018

BJ’s Wholesale Club has filed papers to go public again after seven years of private ownership, betting investors will warm to its warehouse club concept even though the retail sector in general continues to struggle.

As Reuters reports, warehouse club operators “have largely bucked the [retail] downturn as their business models rely more on recurring membership revenues than just top line sales.”

BJ’s operates 215 warehouse clubs, mainly on the East Coast, competing with Costco and Walmart’s Sam’s Club. In a prospectus filed on Thursday, it said membership fee income was $259 million for fiscal 2017, representing approximately half of adjusted EBITDA.

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The company is currently owned by private equity firms Leonard Green & Partners and CVC Capital Partners, which took it private in 2011 for $2.8 billion. The Wall Street Journal reported in April it could be valued between $2 billion and $3 billion.

The prospectus lists a placeholder fundraising target of $100 million for the offering. It would be the second retail listing in 2018 after airport concession operator Hudson Ltd.

“We are in a period now where the consumer economy is looking quite good, investors are a bit more confident with retail now than they have been in the past,” Neil Saunders, managing director of GlobalData Retail, told Reuters. “I think it’s a sensible time to do it.”

According to the Warehouse Club Intelligence Center, the club channel has grown at a compound annual growth rate of 4.5% since 2007, ahead of the grocery and general merchandise channels, which have grown at a rate of 2.7% and 1.1%, respectively.

BJ’s core market is New England, where it pioneered the warehouse club model in 1984. According to the prospectus, it has almost three times as many clubs in the region as its nearest rival.

“Our approach to merchandising positions us between other warehouse clubs and grocery retailers,” the filing said, adding that BJ’s combines the bulk savings of a warehouse club with a broader assortment of perishable and grocery products than its competition.

The company generated net income of $50 million on total sales of $12.8 billion for fiscal 2017.