The worst kept secret in retail

BJ’s Wholesale Club this week formally announced that it planned to explore strategic alternatives and confirmed what had been speculated about in the market place for at least four years. The possible sale of BJ’s and its 189 clubs isn’t likely to have a meaningful impact on the marketplace and could potentially benefit the likes of Sam’s Club and Costco. Assuming a deal involving a private equity buyer, they typically are not keen on injecting millions in fresh capital to open new stores and generally look for ways to enhance the cash generating capabilities of existing operations. Look no further than the situation with Sears Holding and try to recall the last time a new Sears or Kmart store opened. Should BJ’s go the private equity route it is conceivable there could be a further streamlining of the store base and less aggressive pricing as margin preservation becomes more of a priority than fighting a losing price battle with Sam’s and Costco.

It is not a done deal that BJ’s will be sold, something the company made clear in its announcement.

“The company has not made a decision to pursue any specific strategic transaction or other strategic alternative, so there can be no assurance that the exploration of strategic alternatives will result in a sale of the company or in any other transaction,” according to a BJ’s press release. “There is no set timetable for the process. The company does not intend to provide updates or make any further comment regarding the evaluation of strategic alternatives, unless a specific transaction is recommended by the independent committee and the board, or the process is concluded.”