This is an interesting article that tells you quite a bit.
Let’s look at the context of the current securities markets. The stock market is struggling to reach new highs. M&A and IPO activity is strong. Timing is everything.
Private equity (PE) firms - CVC Capital Partners and Leonard Green & Partners - are getting out of BJ’s while the getting is good. "It is a hot potato, get rid of it now!" The thought is "I don't want that POS when the music stops. I think we can get Mikey to buy it (public markets).” And…they are! There is a sucker born every day.
Interestingly, Walmart has been closing ten percent (63) of their Sam's stores recently. Costco has been dominating with a nice steady flow of revenue and earnings. I have been in BJ’s before, but I wasn’t impressed. Costco has 750 stores, Sam’s is down 63 stores from 630 and BJ’s is only 200 stores. If Walmart is suffering, I would be willing to bet that BJ’s is a weak third player. At the same time, online has been eating up those retailers who are “Stuck in the middle”. The article tells you quite a bit about the trends of the warehouse retail business.
Now if PE has owned it, you can rest assure that they squeezed every last nickel out of it before they passed the shell back to the public markets, including battered employees and management. The PE owners shopped it last year but got no takers. Walmart bid 3B for it in 2011 before PE bought it for 2.8B. If BJ’s was an orange, there probably isn’t much left but a little bit of rind.
I’ll pass on BJ’s. I don't like when my oranges taste like leather. It is another Toys are Us in the making!
