BJ’s Wholesale Club, operator of 215 club stores in 16 states (primarily on the East Coast), made it official earlier this month by filing a prospectus to launch an IPO with the Securities and Exchange Commission (SEC).
The Westborough, MA-based discount merchant was a publicly-traded firm until 2011 when current private equity owners Leonard Green & Partners and CVC Capital Partners acquired it in a $2.8 billion all-cash deal.
According to the prospectus, the company plans to offer 37.5 million shares priced at $15 to $17 each, which could raise as much as $637 million that it plans to pay down a significant portion of its $2.4 billion in debt. Some of that debt was incurred to issue $735.5 million dividend to its owners in 2017. In the original private equity acquisition seven years ago, the partners invested about $600 million in cash. A year later, they made a $643 million distribution and in 2013 issued another $450 million dividend.
Leonard Green and CVC currently own 98 percent of BJ’s and would still retain a majority stake in the reformulated company, giving them full control of board of directors’ selections. Chairman Christopher Baldwin, who has also been chief executive, since 2016, would remain BJ’s CEO after BJ’s becomes a public company.
While BJ’s has grown its top line since 2011 – sales for fiscal 2018 were $12.5 billion – earnings were not stellar. BJ’s net income for this fiscal year (ended February 3) was only $50.3 million.
The prospectus also noted the importance of BJ’s presence in metro New York where its 39 clubs accounted for 25 percent of overall sales in 2017.
“Any substantial slowing or sustained decline in these operations could materially adversely affect our business and financial results,” said the filing, which noted some of those potentially threatening issues to consider were declining same-store sales, rising labor, health care and energy costs and cannibalization of existing locations by new clubs.
The prospectus also stated that BJ’s might be vulnerable if there are further changes to food assistance laws (SNAP benefits), acknowledging that approximately 5 percent of BJ’s net sales during fiscal years 2015 to 2017 were driven by food stamps.
“Changes in state and federal laws governing the SNAP program, including rules on where and for what EBT cards may be used, could reduce sales at our clubs,” the prospectus noted.
Additionally, the prospectus revealed that BJ’s was not planning to issue any shareholder dividends any time soon.
BJ’s currently has more than 5 million members and amassed membership fees of $259 million last year.
