Another positive working in its favor is that, while its growth still lags COST, its financials have improved over the past year with many of its key metrics (comp growth, operating margins, membership renewal rate) all moving in the right direction.
Overall, the deal raised $637.5 million in total gross proceeds, which it will use to pay down some of its debt -- which is sizable, due to the aforementioned leveraged buy out. The lead underwriters on the IPO were BofA Merrill Lynch, Deutsche Bank, Goldman Sachs, and JP Morgan.
Shares are set to open for trading later this morning on the NYSE.
Like the two other main wholesale club operators (COST, Sam's Club), BJ offers memberships that allow customers to purchase groceries in bulk, resulting in cost savings of 25% or more compared to traditional supermarket competitors. In addition to to the thousands of items it offers from manufacturer-branded groceries, BJ has two private label brands -- Wellsley Farms & Berkley Jensen -- which have totaled over $2 billion in sales for the company.
The annual membership fee for its base "Inner Circle" membership is $55 per year. Its "Perks Rewards" membership is $110 annually, and it offers additional cost-saving features.
BJ is prominent on the east coast -- particularly in the New England region. Overall, it has 215 large-format clubs spanning across 16 states. BJ also operates 134 gas stations, which it believes results in more trips to its warehouses. And, also similar to COST and Sam's Club, it sells more than just groceries, carrying an assortment of electronics, apparel, home goods, along with other services like tire installation, travel, and vision care.
Taking a look at its FY18 results, net sales were up 3% to $12.5 billion. The increase was due to a 0.8% increase in comparable club sales, incremental sales from two new clubs opened since the beginning of last year and the impact of the 53rd week in fiscal year 2017. Membership fee income was $258.6 million versus $255.2 million in fiscal year 2016, a 1.3% increase. The growth was driven by a 5.8% increase in membership fee income on a cash basis, an increase in its renewal rate and incremental member acquisition efforts.
BJ's cost-savings efforts are apparent on the cost of sales line. Specifically, Costs of sales was $10.5 billion, or 84.1% of net sales, compared to $10.2 billion, or 84.5% of net sales, in the prior year. The decrease of 0.4% was due to successful procurement efforts, assortment optimization and better sales penetration of private label items. Also helping was that private label penetration increased to 19% from 18%.
With the pick-up in topline growth and the solid cost management, operating margin income grew to $220 million from $216 million.