BJ’s Wholesale Club Holdings (NYSE: BJ) returned to public trading on June 27, 2018 with an IPO of 43.125 mn shares issued at USD17 apiece, having been taken private in 2011 by Leonard Green & Partners and CVC Capital Partners.
Though its share price peaked at USD31.45 by September 06, 2018, it has lost c.28.2% since then compared to the 19.1% and 16.1% decline of S&P MidCap 400 Index and Costco Wholesale Corporation (NASDAQ: COST) respectively for the same period. This works out to an overall gain of c.2.7% from the day of IPO to December 20, 2018.
While share price becomes the only form of return to investors with the company not being able to pay dividends in foreseeable future, it could be subject to further pressure with the impending expiry of the ‘lock-up period’ of its shares on December 25, 2018 freeing up 60.5 mn of common stock (c. 44.2% of outstanding common shares) for sale.
Small fry among giants
BJ operates in 16 states in the Eastern United States with 216 warehouse clubs, 136 of which have gas stations. With a business model similar to that of COST (Read my previous article on COST’s business strategy) and Sam’s Club of Walmart Inc. (NYSE: WMT), BJ generated net sales to the tune of c.9.0% and c.21.1% of its competitors respectively as of FY18.
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