Conference Call Replay | BJ's is Coming Back

    June 22, 2018, 11 am ET

    Seven years ago, when BJ's was bought out at 8x EBITDA, it was a very different retail world. Amazon and technology have changed the way people shop. In 2011, Amazon Prime was in less than 5mn households. Today nearly 70mn households are Prime subscribers. Back then, mobile commerce was a novelty used by 7% of Americans. Today it is regularly practiced by over 80% of the population. In 2018, voice commerce is in its infancy but growing fast. Yet the 5% of Americans who use it shop weekly and predominantly in food and consumables.

    Today, BJ’s is coming back to the public markets. It makes sense. America’s #3 warehouse club needs to de-leverage to under 4x EBITDA, the sponsors are looking for an IRR of over 20%, and the window looks about as bright as one could expect in the next few years. Current positives are: Sam’s Club is closing stores, a recent fee hike should drive margins, and their membership renewal rate is at a record high.

    The timing is right for BJ's to raise equity and de-leverage. But be wary. The Amazon vs Walmart “food fight” is not going away. After an uptick in sales and margins into 2019, BJ’s appears better positioned than Kroger but disadvantaged vs Costco and other well capitalized competitors.

    In a clients-only conference call, Greg discussed our outlook for BJ's and the club sector in the context of a U.S. retail market where Amazon is 40% of the growth.

    Replay: Click here

    Conference Call Materials: Click here