BJ’s Wholesale Shares Jump 27% in Return to the Stock Market
BJ’s Wholesale (BJ) has returned to the stock market after seven years and gotten a warm reception despite lackluster recent results and stiff competition from Walmart Inc’s (WMT) Sam’s Club chain, Costco Wholesale (COST) and of course, Amazon.com. (AMZN)
In Thursday late morning trading, BJ’s stock rose 27% to $21.57. On Wednesday, BJ shares were priced at $15 for initial public offering (IPO), the upper end of a previously indicated $15-$17 estimate range, foretelling a healthy appetite for the shares. BJ’s last traded on the stock market in 2011, when it was bought for $2.8 billion by private equity firms Leonard Green & Partners LP and CVC Capital. Seven years is an unusually long time for a company to be held by private equity, which typically looks to flip a company within three to five years.
Much has changed since then in retail, including in the bulk warehouse area. Costco, which reports quarter after quarter of strong comparable sales growth despite the threat from Amazon and its Prime membership model and relative newcomers like Boxed, continue to enjoys intense loyalty from its affluent clientele for its $20 billion-a-year store brand Kirkland and it has emerged as a major online retailer.
Meanwhile, Sam’s Club has been aggressive about closing weak locations, shuttering 10% of its 630 or so stores this year, and aggressively ramping up its tech firepower as well as improving its food offerings.
Comparable sales rose 3% at Sam’s Club last fiscal year, 4% at Costco, but only 0.8% at BJ’s, and that was after two years of sharp declines. Unlike its rivals, BJ’s is not a national chain, operating 200 stores in 16 states, exposing more to the vagaries of regional economies and weather. (Costco has about 750 clubs, including 514 in the U.S.)
Still, under BJ’s CEO Chris Baldwin, the 34-year-old retailer has updated its digital and tech muscle, allowing customers to do things such as use phone apps to scan items as they shop the aisles for a faster checkout. And warehouse clubs and the lower prices they offer remain popular among shoppers.
BJ’s IPO is the second of the year after that of Hudson, which operates stores at airports, showing that retailers can still have successful stock market listings despite the tumultuous environment for the industry.