BJ’s Wholesale Club shares soar on 1st trading day

Christopher Baldwin
The Associated Press

NEW YORK (AP) — Shares of BJ’s Wholesale Club Holdings Inc. are soaring as it returns to the public markets after seven years.

In Thursday morning trading, the stock changed hands at $20.94, a gain of 23 percent, or $3.94. The broader markets were down.

Shares of the company priced at the top of an expected range of $15 to $17 a share.

BJ’s has been a laggard in the increasingly competitive wholesale club industry.

Costco Wholesale Corp., which operates about 750 locations, has been the benchmark for the industry even in the age of Amazon. It has created fierce loyalty among high-income customers with its treasure hunt experience and its powerful store label brand called Kirkland. Sales at stores opened at least a year including gas rose 4.1 percent in the most recent fiscal year ended Sept. 3, 2017.

Meanwhile, Walmart’s Sam’s Club, hurt by weaker locations located in less affluent areas than Costco’s, has seen improving sales as it overhauls its merchandise and expands services. In January, it said it was closing 63 clubs, or 10 percent of its fleet, and converting some of them into e-commerce fulfillment centers. In February, Sam’s Club began offering free shipping for premium members and simplifying its membership tiers. Revenue at stores opened at least a year including gas rose 3 percent for the year ended Jan. 31.

BJ’s is also contending with new rivals like online retailer Boxed, which focuses on millennials who want bulk-sized deals on items like toilet paper and peanut butter — but who can’t or won’t drive to warehouse stores. Most members order through an app and get two-day delivery, and unlike the other clubs, there’s no membership fee.

BJ’s, which has a little more than 200 stores in 16 states, has been trying to make it easier for its customers to shop at its behemoth stores. It’s expanding its program that lets shoppers tally their choices on a phone app or store device as they roam the aisles. Merchandise is also now laid out in quads that display fewer items instead of aisles, making it easier for shoppers to walk around and touch the products.

In its fiscal year ended Feb. 3, BJ’s earned net income of $50.3 million. On a continuing operations basis, earnings per share rose to $3.94 from $3.45. Total revenue totaled $12.75 billion, including $258.6 million in membership fee income. Sales in stores open at least 13 months — a key metric of a retailer’s health — rose 0.8 percent. Excluding gasoline sales, they declined 0.9 percent.

“Costco is setting the pace and seems to be unstoppable,” said Ken Perkins, president of Retail Metrics LLC, a retail research firm. “The question is, how is BJ’s going to drive traffic growth?”

Westborough, Massachusetts-based BJ’s was acquired in 2011 for $2.8 billion by CVC Capital Partners and Leonard Green & Partners, which then took BJ’s private. The buyers reportedly put BJ’s up for sale last year for more than $4 billion but got no takers.

Before going private in the fall of 2011, the retailer rejected an offer of $3 billion from Walmart, according to FactSet.

The warehouse retailer is offering 37.5 million shares and underwriters have an option to buy up to 5.6 million additional shares. The stock is listed on the New York Stock Exchange under the symbol “BJ.”

It plans to use proceeds from the offering to repay debt and for general corporate purposes.

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