The private equity firms are emboldened to seek their biggest dividend yet because they’re telling lenders the company is set to deliver its best year of Ebitda growth since the purchase, pushing those earnings to $475 million for the financial year ending January 2017, the people said. Ebitda is an adjusted measure of profit that gauges a company’s ability to pay its debts.
Some investors are questioning whether that pace is sustainable, especially since BJ’s reported a 1.9 percent decline in same-store sales through mid-November.
Part of the Ebitda growth is being credited to aggressive efforts by Chief Executive Officer Chris Baldwin to reduce procurement and purchasing costs, according to one investor. Baldwin has led the company since February 2016, when he replaced long-time CEO Laura Sen.
Westborough, Massachusetts-based BJ’s is a membership-based warehouse club that sells brand-name and private-label food and general merchandise at low prices in the eastern U.S. Started in 1984, it operates 214 outlets in 15 states with more than 10 million members. Costco Wholesale Corp. and Wal-Mart Stores Inc.’s Sam’s Club are comparable, bigger chains with sales well in excess of the $12.3 billion BJ’s expects to post for its current financial year.
"The warehouse sector is pretty strong," S&P’s Sookram said. "Consumers are looking for value and the warehouse retail club has a compelling value to offer to customers."
This article was provided by Bloomberg News.