Dive Brief:
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Leonard Green & Partners LP and CVC Capital Partners Ltd., the private equity owners of warehouse retailer BJ’s Wholesale Club, are prepping for a possible sale or initial public offering, The Wall Street Journal reports.
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The firms are entertaining investment bank suitors to determine the best course of action. If they pursue an IPO, it would likely happen in the second half of this year, according to the report.
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Membership-based BJ’s Wholesale runs more than 210 stores in 15 states from Maine to Florida and employs more than 25,000 people, according to its website.
Dive Insight:
Leonard Green and CVC Capital took over BJ's Wholesale in 2011, took it private and paid investors dividends several times since. It appears the time is ripe for them to cash out.
“Private equity wants to be in and out in five to seven years,” Suneet Chandvani, head of middle market research at corporate debt intelligence firm Debtwire, told Retail Dive earlier this year. “The goal is after five years, sell it or IPO it.”
BJ’s Wholesale in particular is in a space dominated by Costco and Wal-Mart Stores-owned Sam’s Club, and its business is increasingly threatened by Amazon’s Prime membership. The percentage of U.S. households that pay for Amazon Prime shipping and multimedia services but hold no other club membership has grown from 7.1% in 2013 to 16.2% in 2016, while the percentage belonging to just Costco fell to 9.8% from 14.9% and Sam’s Club dropped to 9.7% from 16.9%, according to research from Cowen and Co. issued last year.
Fatigue with the membership-based model may have led e-commerce startup Jet (now part of Wal-Mart) to drop the approach almost immediately after its launch, according to Profitero VP of strategy and insights Keith Anderson. “It’s successful, but saturated,” Anderson told Retail Dive last year. “They may have seen the writing on the wall.” Wal-Mart itself recently ended its own “Shipping Pass” membership pilot in favor of free two-day shipping with a minimum order, a play for Amazon’s non-Prime customers.
