bj’s wholesale club financial report - · pdf filefor the past six years, is highly...

BJ’s Wholesale Club Financial Report

Jessica Webb

April 22, 2013

University of Central Florida

Professional Writing – ENC 3250

BJ’s Wholesale Club Financial Report 2

ABSTRACT

This report includes information on the financial aspects of the company BJ’s Wholesale

Club. Along with this financial material, this report also includes the basic company information

for BJ’s Wholesale Club, background information, and comparative figures with other

companies. The general information explored here for BJ’s Wholesale Club is to establish BJ’s

as a prime competitor with other wholesale clubs and as a quality retail store in the United States.

The purpose of this report is to present the financial stability of BJ’s Wholesale Club and

recommend to financial investment groups that this company holds strong investment potential.

The financial information presented will allow investors to become knowledgeable about BJ’s

recent fiscal and economic achievements, as well as how they fair in the public’s opinion as one

of the leading retailers in the country.


TABLE OF CONTENTS

ABSTRACT ……………………………………………………………………………….. 2

EXECUTIVE SUMMARY ……………………………………………………………….. 5

INTRODUCTION ………………………………………………………………………... 6

BACKGROUND INFORMATION ……………………………………………................ 7

FINANCIAL FINDINGS ………………………………………………………………… 10

CONSUMER FINDINGS …………………………………………………………………. 14

CONCLUSION ……………………………………………………………………………... 17

RECOMMENDATION …………………………………………………………………… 18

WORKS CITED …………………………………………………………………………… 19

GRAPHICS WORKS CITED ……………………………………………………………... 20

GLOSSARY ……………………………………………………………………………….. 21


LIST OF FIGURES AND TABLES

FIGURE 1 ………………………………………………………………………………. 7

FIGURE 2 ………………………………………………………………………………. 8

FIGURE 3 ………………………………………………………………………………. 9

FIGURE 4 ………………………………………………………………………………. 11

FIGURE 5 ………………………………………………………………………………. 12

FIGURE 6 ………………………………………………………………………………. 14

TABLE 1 ……………………………………………………………………………...... 10

TABLE 2 ……………………………………………………………………………….. 15


EXECUTIVE SUMMARY

This report examines and analyzes BJ’s Wholesale Club as a company of potential

interest for investment. The purpose of this report is to accurately present the information in a

clear and concise manner. The author, who has experience working for this particular company

for the past six years, is highly aware of any and all services that BJ’s offers its customers, as

well as details about products and services, therefore providing within this report inside

information that is very valuable. This report hopes to deliver accurate information about

financial stability within the company and offer insight into the company’s standing in the

opinions of its customers.

BJ’s Wholesale Club is a warehouse style business which, for a yearly fee, offers its

customers various products and services, as well as items packaged as “bulk.” BJ’s is known for

its value on products and for its goal of providing outstanding customer service. Within the

report that follows, the author will attempt to explain the company’s roots and current standing,

its services and products, and why the yearly membership fee is worth the cost. Also, the author

will provide graphics that illustrate how the company is doing in terms of financial success, as

well as public opinion. In the conclusion of the report, the author will offer insight into future

success of the company as well as any recommendations for KIG in proceeding with investment

into BJ’s Wholesale Club.


INTRODUCTION

This report examines the company BJ’s Wholesale Club, with emphasis on its potential

for long-term investment. This report also gives information on BJ’s Wholesale Club itself,

which includes company background, services and product information, and financial

information. The information is presented by the author who has current knowledge of BJ’s

Wholesale Club from working experience and daily interactions with customers and material

circulated within the company. Also included in this report is information about BJ’s standing in

the public’s opinion.

BJ’s Wholesale Club is one of the leading companies in wholesale retail in the United

States (“Form 10-k,” 2011). BJ’s offers customers “bulk” items at competitive prices with

regular retail stores. The report that follows will present more company information, as well as

financial stability and investment potential. For this analysis, the author was able to find

adequate information and supporting details provided from sources online, which included

financial reports from BJ’s Wholesale itself, as well as stock information and comparative

graphics. The author was also able to find information from a BJ’s location that was useful in

providing data. What this report hopes to achieve is to create awareness of BJ’s Wholesale Club

as a proper leader in retail, as well as a contributing force to the American business. The purpose

of this report is to determine whether BJ’s Wholesale is a suitable candidate for Knights

Investment Group.


BACKGROUND INFORMATION

BJ’s Wholesale Club “is a leading operator of membership warehouse clubs in the

Eastern United States” (“Company background,” 2013). BJ’s “introduced the warehouse club

concept to New England in 1984 and has since expanded to become a leading warehouse club

operator in the eastern United States” (“Form 10-k,” 2011). The current company headquarters is

located in Westborough, Massachusetts. The name “BJ’s” comes from the name of the first

company president’s daughter, Beverly Jean (“Team member guide,” 2010, p. 6).

Figure 1 (“Bj’s,” 2013)

BJ’s is a wholesale club, specializing in products sold in “bulk,” or products sold in

larger quantities. This approach, which offers more product at lower prices, is geared towards

large families or people interested in saving more while getting more. The wholesale club is

different from other grocery or retail stores because it charges its members a yearly fee, currently

$50, to shop. BJ’s is committed to customer service, especially when charging this yearly fee for

“members” to shop. Only members can shop at BJ’s, so it is extremely important to keep


members satisfied with their shopping experience, as well as ensuring that they will continue to

come back year after year.

Figure 2 (“Bj,” 2013)

As shown in Figure 2, there are currently 190 BJ’s clubs operating in fifteen states,

including mostly states along the East Coast of the U.S. (“Company background,” 2013) BJ’s

carries a unique brand of products made by Berkley & Jensen, or B&J for short, and Wellsley

Farms. Much like stores such as Wal-Mart and Target, BJ’s has these exclusive brands of

products for consumers looking to purchase items of good quality but at lower prices than the

“big brand” products. BJ’s offers shoppers a variety of products, such as foods, clothing, health

and beauty products, cleaning supplies, household necessities, and “seasonal” and recreational

products. They also sell gas, tires, propane, liquor, bakery items, optical products, and deli meats.

Furthermore, they have special savings on items “outside” of the club, such as car rentals,

vacations, and home improvement (“Company background,” 2013). According to BJ’s official

website, they offer “savings of more than 30% off supermarket prices” (“Company background,”

2013) and “convenient one-stop shopping” (“Company background,” 2013). BJ’s also accepts all

major credit cards, debit cards, and even EBT/food stamp cards as payment options. They accept


manufacturer coupons and even have their own BJ’s coupons, allowing customers to use both on

a single product (“Company background,” 2013). As BJ’s is very member friendly, this is an

extremely important feature for the company. Another major feature that BJ’s offers is towards

businesses who need to buy product in bulk. Businesses can sign up for a membership and

receive products that are tax free because they are for resale purposes. This is a great benefit for

smaller businesses who would like to save on the products they sell.

Figure 3 (Hammond)

BJ’s biggest competitors are Costco and Sam’s Club, both of which are also wholesale

clubs (“Yahoo,” 2013). Unlike other wholesale clubs, BJ’s prides itself on taking all

manufacturer coupons as well as BJ’s coupons, and offering lower prices on gasoline than local

gas stations. Although it does rank #3 in the country when it comes to wholesale clubs, following

Costco and Sam’s, it is ranked #1 in New England, where it originated (“Yahoo,” 2013).


FINANCIAL FINDINGS

BJ’s Wholesale Club would be a great investment because, according to TheStreet.com,

BJ’s year-to-date performance was up 6.97% on the New York Stock Exchange in 2011 (“Bj:

stock quote,” 2011). This upward trend in stock for the year is a promising outlook for the future.

An investment in this company at this time would most likely turn some kind of profit. In 2010,

BJ’s made Fortune 500’s annual list of the top companies in America. It ranked 232 (“Fortune

500 2010,” 2010). According to this information, BJ’s financial success is proof that it contains

highly valuable assets when it comes to investment.

Fiscal Year Ended January 29, 2011 January 30, 2010 January 31, 2009

$ % of

Sales $ % of

Sales $ % of

Sales (Dollars in Millions except Per Share Amounts) Net sales $ 10,633 100.0 % $ 9,821 100.0 % $ 9,662 100.0 % Membership fees 191 1.8 180 1.8 175 1.8 Other revenues 53 0.5 50 0.5 47 0.5

Total revenues 10,877 102.3 10,051 102.3 9,884 102.3 Cost of sales, including buying and occupancy

costs 9,697 91.2 8,951 91.1 8,867 91.8 Selling, general and administrative expenses 934 8.8 861 8.8 787 8.1 Preopening expense 12 0.1 11 0.1 5 0.1 Restructuring, impairments and other 26 0.2 — — — —

Operating income 208 2.0 228 2.3 225 2.3 Interest (expense) income, net (1 ) — (1 ) — 1 —

Income from continuing operations before income

taxes 207 2.0 227 2.3 226 2.3 Provision for income taxes 83 0.8 92 0.9 88 0.9

Income from continuing operations 124 1.2 135 1.4 138 1.4 Loss from discontinued operations, net of income

tax benefit (29 ) (0.3 ) (4 ) (0.1 ) (4 ) —

Net income $ 95 0.9 % $ 131 1.3 % $ 134 1.4 %

Diluted earnings per share:

Income from continuing operations $ 2.31

$ 2.47

$ 2.35

Loss from discontinued operations (0.54 )

(0.07 )

(0.08 )

Net income $ 1.77

$ 2.40

$ 2.27

Number of clubs in operation at year end 189

187

180

Table 1 (“Form 10-k,” 2011)


As we can see from Table 1 above, the net income for BJ’s in 2011 was $1.77 million,

which compared to the previous two years was considerably lower. But we must take into

account that there was at this time a “loss from discontinued operations,” which indicates that a

few stores were closed. Obviously this has had an impact during the time of this report, but now

that a couple years have passed since then, BJ’s has managed to maintain their net income. As

seen in Figure 4 below, BJ’s has managed to generate more consumer spending than Sam’s Club

in 2008, although Costco is still the clear winner of the three. We can contribute this to Costco

being a larger chain in the United States.

Figure 4 (Ward, 2008)

Another powerful statement provided by BJ’s financial report is that “net sales increased

8.3% from 2009 to 2010. The increase was driven by a 4.4% increase in comparable clubs sales

and sales from 14 new clubs opened since the beginning 2009” (“Form 10-k). From this data, we

can conclude that the opening of new clubs generated more sales. This is a great sign for the

future, if any more new clubs were to open around the country. It is also probable that if BJ’s

were to further expand their business to more states across the U.S., they would most likely see


an even bigger impact on sales and revenue. Consumers from states without a BJ’s club may

generate more sales if one were to open near them. While BJ’s has not announced any plans for

future openings, the possibilities from this idea would certainly garner attention and attract new

customers.

An interesting point to note is the impact of the current state of the economy affecting

sales at BJ’s, and likewise other businesses. For example, “the increase in comparable club sales

includes a favorable impact from gasoline sales of 2.0%. Total gasoline sales in 2010 were 25%

higher than 2009 due to an approximate 15% increase in the average retail price per gallon and

an approximate 9% increase in gallons sold” (“Form 10-k,” 2011). When the gas prices rose at

this time, BJ’s was able to attract more customers seeking lower priced gasoline. As a result, the

revenue from gas increased. By offering lower prices on important necessities such as gasoline in

surrounding areas, BJ’s is able to continue this steady increase in sales.

Figure 5 (“Privco,” 2013)


From the graph shown in Figure 5, we can determine that from 1998 to 2005, revenue

from membership fees alone have dramatically increased. We can also determine that from 2005

until now, that this revenue most likely has continued on an upward path. The fact that

membership fees paid by members is generating this amount in millions of revenue is a

promising factor for the financial wellbeing of BJ’s Wholesale. This upward trend shows great

stability within BJ’s to hold onto their customers while providing them with the items they need.

Obviously, they are returning year after year, which generates a considerable sum of money for

the business itself.


CONSUMER FINDINGS

As one of the leaders in retail in the United States, BJ’s Wholesale Club also does well

with consumers. This is a very important aspect when considering investment into a company.

Without a good opinion from the public, a company is most likely not going to succeed in the

future. Luckily, BJ’s Wholesale Club has managed to satisfy its customers by providing quality

service and products. Below is Figure 6, which provides overall consumer experience ratings for

a wide variety of popular retail stores in the U.S in 2012.

Figure 6 (Tempkin Group, 2013)


From the data above, we can determine that BJ’s Wholesale Club is ranked 5th

in terms of

overall positive experience had by shoppers. With a 76% positive review, it far exceeds its

competitor Costco, who received a 72%. BJ’s other competitor, Sam’s Club, leads the group with

an outstanding 85%, but BJ’s is not so far behind. What we can conclude from this data is that

BJ’s, which provides stores in only fifteen states, is able to provide quality service that outshines

Wal-Mart, K-Mart, Macy’s, and many other highly popular and more widely recognizable stores.

In Table 2 below, we have another experience rating chart that provides more insight into

this data which represents the positive experiences of customers at stores nationwide.

Table 2 (Tempkin Group, 2013)


This table indicates that BJ’s Wholesale Club ranks 6th

in 2011’s overall ratings. This

means that between 2011 and 2012, BJ’s improved on its overall experience ratings. If this is any

indicator for the future, then BJ’s Wholesale Club is surely to exceed these figures in 2013 and

continue improving. With that being said, an investment on such a stable and potentially

increasing company seems to be the best option.


CONCLUSION

In conclusion, BJ’s Wholesale Club is one of the leaders in wholesale retail in the United

States. It does well in terms of business and generates a great deal of revenue. It is a suitable

candidate for investment with KIG on these terms alone. In the future, BJ’s will most likely

surpass its current financial gain and continue on in maintaining a leading spot in America’s

retail, financially and in positive opinions. If BJ’s ever chose to open more store in different

locations, the outlook is extremely positive. BJ’s personally feels that their goals for the future

“are to maintain momentum in market share gains, expand [their] chain, and invest in [their]

existing business through renovations, club payroll and technology upgrades” (“Form 10-k,”

2011). It is also imperative to note that they are “planning for strong earnings growth driven by

the membership fee increase, cost savings from [their] restructuring actions, and benefits from

operating initiatives to drive margin growth and reduce expenses” (“Form 10-k,” 2011). With

this being said, it can be determined that BJ’s Wholesale expects that “these benefits will be

partly offset by continued investments in technology, as well as increased club payroll and club

remodels, designed to drive market share gains in food and consumables” (“Form 10-k,” 2011).

In the future, BJ’s looks forward to growth and increasing revenue, which makes them ideal for

investment opportunities.


RECOMMENDATION

Based on the financial findings provided within this report, I would highly recommend

BJ’s Wholesale Club as a company for investment. During my research, I came across some

interesting and ultimately decision-altering information. The only issue I see in going forward

with investment into BJ’s is that just recently, the company was acquired by privately owned

businesses Leonard Green & Partners and CVC Capital Partners (“Wikipedia,” 2013). Because

of this turn of events, I cannot at this time recommend that KIG invest in BJ’s Wholesale Club,

only due to the fact that BJ’s has just become privately owned. If BJ’s were still public, I would

highly recommend that KIG acquire it without delay, but based on the facts of recent events, it

would be extremely difficult to move forward with this purpose. I do still believe that BJ’s

Wholesale, along with other wholesale stores across the country, is a very good investment

opportunities to consider, and perhaps in the future if BJ’s is not privately owned, I would

encourage KIG to move forward in acquiring it immediately.


WORKS CITED

Bj: Stock quote. (2011, Sep 30). Retrieved from http://www.thestreet.com/quote/BJ.html

Company background. (2013). Retrieved from

http://www.bjs.com/companybackground.content.about_background.A.about

Form 10-k. (2011, March 25). Retrieved from

http://www.sec.gov/Archives/edgar/data/1037461/000119312511079572/d10k.htm

Fortune 500 2010 - bj's wholesale club. (2010, May 3). Retrieved from

http://money.cnn.com/magazines/fortune/fortune500/2010/snapshots/10558.html

Team member guide (2010). Bj's wholesale club, inc. team member guide. BJ's Wholesale Club.

Wikipedia. (2013, Feb 10). Bj's wholesale club. Retrieved from

http://en.wikipedia.org/wiki/BJ's_Wholesale_Club

Yahoo - bj's wholesale club, inc. company profile. (2013). Retrieved from

http://biz.yahoo.com/ic/53/53503.html


GRAPHICS WORKS CITED

Bj. (2013). Retrieved from http://find.mapmuse.com/brand/bjs-wholesale-clubs

Bj's. (2013, Jan 1). Retrieved from http://moneysavingmom.com/store_deals/category/bjs

Hammond, K. (n.d.). File:bjs wholesale club va.jpg. Retrieved from

http://commons.wikimedia.org/wiki/File:BJs_Wholesale_Club_VA.jpg

Privco - bj's wholesale club, inc.. (2013). Retrieved from http://www.privco.com/private-company/bjs

wholesale-club-inc

Tempkin Group. (2013, Mar 19). Customer experience matters - bj. Retrieved from

http://experiencematters.wordpress.com/tag/bjs-wholesale-club/

Ward, S. (2008, Nov 25). Costco crushes sams's and bj's. Retrieved from

http://www.thestreet.com/story/10449989/1/costco-crushes-sams-and-bjs.html


GLOSSARY

BULK – Products that are sold in larger quantities than normally and at slightly cheaper

prices

MEMBERS – Term given to BJ’s customers, who are considered members for joining

the club

REVENUE – Amount of money generated as income

WHOLESALE – facility like a warehouse that offers consumers bulk items and items for

resale

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