When BJ’s Wholesale Club went private in 2011, the discount retailer had $10.6 billion in revenues from the previous year and 190 membership-based warehouse clubs. On June 28, 2018, the company went public again. In its prospectus, the company stated revenues of $12.8 billion last year and net income of $50 million. The Westborough, Massachusetts-based company also wrote that it had instituted several operational improvements, such as streamlining its supply chain through IT initiatives and introducing employee-centric programs. (See also: BJ's Wholesale Club Up For Sale, Amazon Might Be Interested).
Shares for BJ's stock were priced at $17 on June 27, and it is estimated that the company's IPO could raise $637.5 million. According to its prospectus, the money raised on June 28 will be used to repay some of the company's $2.4 billion debt.
Here are three ways in which the company makes money.
The biggest and most important source of revenue for BJ’s is its member base. The company’s prospectus reported five million paying members out of a total of ten million. The most popular membership tier is the Inner Circle Membership, which promises significant product discounts to customers for the price of $55 per year. According to its prospectus, members brought in $259 million in revenues last year. BJ’s targets customers with an annual income of approximately $75,000. They make 22 annual trips to its stores, on average. The company claims several advantages from the membership model. The most important one is customer data. “This member data allows us to better execute supplier renegotiations, competitive contract options, SKU optimization and brand switching,” BJ’s wrote in its prospectus. (See also: Which Warehouse Club And Retail Memberships Are Worth It?)
BJ’s reports leasing or owning 134 gas stations in its prospectus. A majority of those gas stations are leased, meaning that the company does not operate the stations themselves. Installing gas stations is a risky strategy since it would mean increased operational costs, lower margins, and risks through exposure to volatile oil prices. But those risks come with paybacks as customers stop by at the gas stations to purchase high-margin grocery items. Back in 2006, BJ’s reported increased sales on the back of increasing gas prices. The contribution of gasoline sales to overall comparable store sales has again increased on the back of increased prices for oil. Gasoline sales comprised 0.3% of comparable store sales last year. They were already responsible for 1.7% of the overall sales as of Feb. 3 this year.
Private label brands
BJ’s owns two private label brands – Wellsley Farms and Berkley Jensen. Together they comprise a broad range of products. The former offers ready-to-eat consumables and groceries while the latter is associated with a plethora of products, from dog food to absorbent baby diapers. According to BJ’s prospectus, the labels brought in $2 billion in revenue last year.