Breaking the Wall

Thanks to everyone who has been coming out to our meetings and discussing their personal problems with BJ's...They've been a great success, we're learning so much but at the same time there is a common theme... All the problems seem to be the same, no matter what store location we're speaking to workers at it's the same thing. Managers taking advantage of their workers, by changing hours, cutting hours, verbal abuse, etc... We'll keep you all posted on the latest news as usual including a special piece we're developing now for later this week, and we all hope your holidays are better than the treatment at the club...

All I want for Christmas is...."More Hours!"

Talking to many workers recently we've discovered that workers are constantly annoyed about their hours being cut. "At every BJ's I've ever been in I get at least 4 workers complaining to me about cut hours" says a former BJ's employee... Are your hours being cut? Let us know...

BJ's Wholesale Club: Providing customers with diamonds; Providing employees with minimum wages

We've already seen massive diamonds sold through stores like Costco and Sam's Club. Now BJ's Wholesale Club has created an online store they decided to make a splash by putting an expensive dazzler on sale. They are selling a 41-total-carat-weight diamond necklace for $249,999.99. The online store has items that are not available in stores and for a limited time non-members can shop the site at member prices. At this price it'd take a BJ's Worker 31,250 hours of work...or working 1302 straight days to purchase this necklace, and that's without factoring in what BJ's Workers pay for Health Care. Anyone else see a problem here??? Why is it the BJ's Customers get a deal and workers continue to get the short end of the stick???

Thousands and thousands shop at BJ's especially around this time of year for the holiday's, and BJ's continues to provide great deals for the consumers, but when will BJ's start helping the people who make their company what it is?

Things need to be changed at BJ's Wholesale Club now. BJ's workers work too hard for this sort of treatment.

BJ's Land a Buyout Lure

Retail
BJ's Land a Buyout Lure
By Nicholas Yulico
TheStreet.com Staff Reporter
11/30/2006 7:04 AM EST
URL: http://www.thestreet.com/newsanalysis/retail/10325034.html

Imagine buying a retail stock and getting $750 million of real estate value for free. That's essentially the deal that investors are getting at BJ's Wholesale Club (BJ) -- and it is one reason why buyout firms may be circling. With the recent departure of the company's chief executive, talk of a possible leveraged buyout for BJ's is heating up. Much of the interest has to do with "hidden real estate value," a retailing play made famous by Ed Lampert's successful merger of Kmart and Sears in 2004, which resulted in the giant now known as Sears Holding (SHLD) . BJ's has long been tossed around as a buyout candidate because it has the qualities that private equity loves. The company owns more than a third of its properties, has just $11 million of long-term debt, and should post $300 million of annual earnings before interest, taxes, depreciation and amortization (EBITDA) next year.

Moreover, BJ's real estate alone is worth at least $750 million, according to an estimate calculated by TheStreet.com. The abrupt departure of BJ's CEO Mike Wedge last Wednesday, just 48 hours before Black Friday, was "too odd to ignore," wrote JP Morgan analyst Charles Grom in a research note last week. The stock bounced 10% on the news that Wedge was leaving. The departure "leads us to believe that the company's Board of Directors may be beginning to think strategically, including a potential sale of the company or other recapitalization alternatives, including real estate divestitures," Grom wrote.

BJ's stock, currently at around $32, has an enterprise value of $2.1 billion, which is 7.4 times trailing twelve-month EBITDA. Costco (COST) , the largest U.S. wholesale club operator, has a $53 stock that trades at 9.6 times trailing EBITDA. BJ's deserves to trade at some sort of discount to Costco because it has posted slower earnings growth in recent years and faces more challenges as the country's third-largest wholesale club operator. Sam's Club, which is owned by Wal-Mart (WMT) , is the second-largest discount club. However, even if you apply a slight discount to the Costco multiple and add to that a bottoms-up analysis of the real estate, you get a big number for BJ's stock value, says one large investor in the stock who spoke on the condition of anonymity. "This makes for the perfect going-private transaction," the investor says. Another large owner of the stock believes that BJ's is worth at least $38 in an LBO and estimates the real estate is worth about $1 billion.

Real Estate Value Unrealized

According to the company's annual report, BJ's had 165 warehouse club locations as of January, of which 48 are owned and 11 locations are ground leases (where the company owns the building, but leases the underlying land). The remaining stores are leased. BJ's doesn't specify which specific locations are owned, and a company spokeswoman declined to provide this information. The Natick, Mass.-based company's stores are spread across the Eastern seaboard, with a little more than half in New York, Florida, Massachusetts and New Jersey -- all desirable locations from a retail and real estate perspective Strong buyer demand for such properties has driven down cap rates, or initial rates of return, boosting real estate values to all-time-high levels. The demand is coming from real estate investment trusts, 1031 tax-exchange buyers, and high-net-worth individuals looking for tax shelters, industry experts says. CB Richard Ellis, a leading commercial real estate firm, is currently marketing for sale a rather typical BJ's Wholesale Club in Cutler Bay, Fla., just south of Miami. The seller is a private real estate investment trust. The cap rate is 6.75%, with initial rents of $8.40 per square foot per year. The 108,000 square foot property is being sold for $13.4 million. Jeffrey Thomas, the CB Richard Ellis broker who is marketing this listing, believes a 7% cap rate is a conservative number to apply to BJ's national portfolio of 48 owned stores. In fact, the true cap rate could be closer to 6.5%, he says. For the 11 sites where BJ's has a ground lease but owns the building, a higher cap rate of 8.25% to 8.5% should be used, he says. Using these cap rates and CB Richard Ellis data, TheStreet.com came up with a value of about $750 million for the 59 stores that BJ's owns -- and that's likely a conservative estimate. This analysis uses a relatively low annual rent of $8.50 per square foot. CB Richard Ellis broker Greg Dalton says rents for new warehouse clubs typically range in the $10 to $15 per-square-foot range, per year. Old stores might see rents in the $7 to $9 range, he says. Higher rents would result in higher property valuations. BJ's balance sheet lists the value of its land and buildings at $584 million before accumulated depreciation. (The company doesn't specifically break out the depreciation charges for the land and buildings, so it's hard to decipher the book value of these assets, which would be lower). The company's stock isn't reflecting the true value of the company's real estate. On a sum-of-the-parts analysis, the company's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) estimate for next year would be $245 million after the sale of all real estate. That estimate subtracts additional annual rental expenses. Over the past eight years, companies paid an average 10 times EBITDA on the 32 large merger and LBO transactions among retail stocks, according to A.G. Edwards. Applying a seven-times multiple to that adjusted EBITDA stream (roughly where the stock is currently trading now) and adding back the approximate $750 million of real estate, the stock is worth at least $37.

Value-Creating Moves Needed

There are several ways the company can realize this real estate value. BJ's could sell the entire real estate portfolio in a sale-leaseback transaction and then distribute the profits to shareholders in the form of a special dividend or share buybacks. The company also could recapitalize itself by keeping the real estate, then levering up the balance sheet to buy back shares -- a method that CBRL Group (CBRL) , owner of the Cracker Barrel stores, pursued last year. Cathy Maloney, a BJ's spokeswoman, declined to comment on these potential scenarios or a possible company buyout. She says the company's board had previously looked at doing a sale-leaseback, but they "have a bias against doing that." "They want to maintain an investment grade rating. We wouldn't want to put that into risk by taking on more lease obligations," Maloney says. BJ's has about $130 million of minimum lease payments due next year, excluding the 10 new stores expected to open this year. It's questionable whether doing a sale-leaseback would hurt the company's expansion efforts, as Maloney suggests. "Companies like Best Buy (BBY) and CVS (CVS) own virtually no real estate assets and have great credit ratings," says Christopher Volk, CEO of Spirit Finance (SFC) , a REIT that specializes in sale-leasebacks. A better case can be made that the real estate the company owns is going to waste right now, since it has absolutely no value in the stock market. Unless the company wakes up to this fact, the quickest and easiest way for shareholder value to be restored looks to be an outright sale of the company. And a buyout of at least $37 sure could be reasonable.

What's Next for BJ's??

CEO Resigns: What's next for BJ's? (Taken from RetailwireNews)

By George Anderson

BJ's Wholesale Club has been the subject of takeover rumors for some time now and the speculation surrounding the company has only increased with last week's sudden resignation of Mike Wedge, the company's president and CEO.

A company release issued by Mr. Wedge and Herb Zarkin, chairman of the board for BJ's, said, "While the company has made great strides in its efforts to improve general merchandise sales and customer traffic, overall progress has not come as quickly as we had hoped and expected."

Bear Stearns analyst Christine Augustine expressed some surprise over the timing of the announcement given that the holiday sales season has just begun.

Another analyst, Neil Currie of UBS, said Mr. Wedge's departure "may increase the speculation of BJ's as a potential takeover prospect" and that "past comments from Mr. Wedge indicated that he would not welcome such an approach."

BJ's was quick to dismiss rumors of a takeover by private equity firm or another retailer. Company spokesperson Amy Russ, told The Associated Press, Mr. Wedge's resignation was "not a signal to the market that the company is for sale."

Despite some weaknesses, BJ's is seen as an attractive acquisition target because it has a solid cash flow and balance sheet.

Discussion Questions: What does BJ's Wholesale Club need to do if it is to successfully address its customer traffic and general merchandise sales issues? Would the company be well advised to pursue strategic alternatives including a possible sale?

• BJ's CEO resigns amid sales disappointment - Reuters
• BJ's Wholesale CEO Resigns - The Associated Press/CBS News
• Mike Wedge To Retire From BJ's Wholesale Club - BJ's Wholesale Club

BJ's CEO Resigns...Is there a hidden message??

The top executive at BJ's Wholesale Club Inc. resigned Wednesday amid disappointing sales at the nation's No. 3 retail warehouse club, fueling speculation that the company could be ripe for a takeover during the busy holiday shopping season.

The company said it wasn't for sale.

BJ's shares jumped 10 percent after the company announced that Mike Wedge was stepping aside immediately as president and CEO, positions the 18-year veteran had held for four years.

BJ's 68-year-old chairman, Herb Zarkin, will serve as interim CEO until the company's board finds a permanent successor for Wedge, 53.

Wall Street analysts said the move came in response to recent disappointing sales at the chain of 171 warehouse clubs _ a topic the company touched on in a joint statement by Wedge and Zarkin.

"While the company has made great strides in its efforts to improve general merchandise sales and customer traffic, overall progress has not come as quickly as we had hoped and expected," Wedge and Zarkin said. "We agree that the company's leadership team will benefit from a fresh perspective at this time."

After some analysts issued research notes suggesting the personnel move could be the precursor to a takeover _ a rumor that had been circulating even before Wednesday's announcement _ BJ's sought to squelch such talk.

"Today's announcement is not a signal to the market that the company is for sale," BJ's spokeswoman Amy Russ said.

Shares of BJ's soared $2.95 or 10 percent to close at $32.48 in very heavy volume on the New York Stock Exchange, where the stock has traded between $25.18 to $33.07 in the past 52 weeks.

UBS analyst Neil Currie said in a research note that the move "may increase the speculation of BJ's as a potential takeover prospect." The company's strong cash flow and conservative balance sheet make it a good candidate for private equity investors, he wrote.

"Past comments from Mr. Wedge indicated that he would not welcome such an approach," Currie said.

Other analysts speculated Wedge was forced out.

"We believe the board requested Wedge's resignation based on disappointing financial performance, and in particular the continued challenges of negative traffic trends and lackluster general merchandise sales," Bear Stearns analyst Christine Augustine wrote.

The move's timing also led to concern about a disruption in the company's management during a crucial sales period.

"We're surprised about the timing of this resignation given that it is the start of the holiday season," Augustine wrote, noting that the company typically generates 40 percent of its annual profits in the year's final quarter.

The announcement of Wedge's departure came nearly two weeks after BJ's reported its third-quarter profit fell 34 percent as costs edged higher along with sales. Net income fell to $18.3 million from $27.8 million in the year-ago period.

BJ's, with more than 20,000 employees and nearly $8 billion in revenue last year, runs 94 gas stations in addition to its membership warehouse clubs, which stretch across 16 states from Maine to Florida, with the heaviest concentration in the Northeast, particularly New England. About one-quarter of BJ's locations have in-store pharmacies.

BJ's is No. 3 in the wholesale club business behind Wal-Mart Inc.'s Sam's Club, which has 570 U.S. clubs, and Costco Wholesale Corp., with 364 U.S. locations.

BJ's Wholesale Club Pays 233 Employees $320,000 in Overtime Back Wages Following U.S. Labor Department Investigation

BJ's Wholesale Club Pays 233 Employees $320,000 in Overtime Back Wages Following U.S. Labor Department Investigation

BOSTON -- BJ's Wholesale Club, Inc., based in Natick, Mass., has paid $320,000 in back wages to 233 employees for uncompensated overtime work revealed during a U.S. Department of Labor investigation.

"Both this investigation and our new Overtime Security rules reflect our commitment to protecting the overtime rights of workers," said Secretary of Labor Elaine L. Chao. "In this case, Club Personnel Managers weren't receiving their rightful overtime pay, and this Administration took action and restored $320,000 in back wages to 233 employees. Workers' overtime rights are further strengthened by our new Overtime Security rules, which increase protections for millions of workers by updating and clarifying the old regulations."

The investigation by the Labor Department's Wage and Hour Division covered the period between Oct. 6, 2001 and Oct. 4, 2003 and found that one position in the company - that of Club Personnel Manager - was improperly classified by the employer as being exempt from overtime under the federal Fair Labor Standards Act (FLSA).

Under the FLSA, covered workers are entitled to the minimum wage and overtime pay at one and one-half times the regular rate of pay after 40 hours of work in a workweek.

The company owns and operates a chain of retail "club" establishments with 140 locations throughout the Northeast. A self-audit done by BJ's subsequent to the Labor Department investigation revealed that the firm employed 233 individuals in the position of Club Personnel Manager during the period covered by the investigation. It was also shown that each of these employees worked approximately five hours of overtime per week during the period.

BJ's management agreed that the 233 Club Personnel Managers were due $320,000 in overtime-back wages, and to complete the back wage payments by June 30, 2004.

The Wage and Hour Division (WHD) recovered more than $212 million in back wages in fiscal year (FY) 2003, a 21 percent increase over the record-setting amount of FY 2002. Average days to resolve a complaint decreased in FY 2003 from 129 days to 108 days. WHD assessed employers nearly $10 million in civil money penalties in FY 2003.

For more information about the provisions of the FLSA, call the Department of Labor's toll-free help line at 1-866-4USWAGE (1-866-487-9243), or contact the Boston office at (617) 624-6700 or the Hartford office at (860) 240-4160. Information is also available on the Internet at www.wagehour.dol.gov.

BJ's Wholesale Club agreed to pay $11 million

BJ's Wholesale Club agreed to pay $11 million

BJ's Wholesale Club, Inc. and a meat supplier last week agreed to pay $ 11 million to the family of a New York girl who became ill after eating contaminated hamburgers.

Attorneys for Katelyn Koesterer, who suffered life-threatening injuries including hemolytic ueremic syndrome, sued the store for selling adulterated meat that was found to contain E. coli O157:H7. The Koesterer family bought the 90% ground beef at the West Nyack, N.Y., store in May 2002. The family of another girl, Christinia Graff, also sued the retailer after she became ill from eating contaminated hamburgers served at the Koesterer house.

Koesterer's attorney William Marler also represents a young boy whose family bought tainted hamburger from another BJ's Wholesale Club store. That family's meat matched the genetic profile of the meat bought at the West Nyack store.
The boy's lawsuit is still ongoing, said Marler, who refrained from commenting on the $ 11 million settlement due to a court-imposed confidentiality agreement. However, he did add that the amount "is never enough to make it right," since the 8-year-old girl will have "life-long" health problems as a result of her injuries.

The family's lawsuit has triggered others down the meat-handling supply chain. BJ's Wholesale Club sued meat distributor C&S Wholesale Grocers, Inc., which then sued its meat supplier, Taylor Packing Co., Inc. and Moyer Packing. C&S also charged the meat supplier with failing to obtain insurance to cover these types of claims. Moyer argued that the meat was contaminated after it left its control.

BJ's Wholesale Club Sued For Alleged Racial Slurs

(CBS4) NATICK The federal government is suing Natick-based BJ's Wholesale Club for allegedly discriminating against African-American and Hispanic workers at it's store in Homestead, Florida. The lawsuit claims the workers were subjected to racial slurs and epithets.

According to the lawsuit filed Monday by the U.S. Equal Employment Opportunity Commission (EEOC), a manager at the store allegedly made racial and ethnic slurs and insults against at least one Hispanic employee and several African-American workers.

The EEOC claims the slurs created a hostile work environment, a violation of the US Civil Rights act.

The EEOC says it decided to file the lawsuit after trying to reach an agreement with BJ's. When efforts to resolve the complaint failed, the decision was made to sue for money damages and changes in the company's employment policies. The EEOC is also seeking punitive damages.

In a statement released by the EEOC, Delner Franklin-Thomas, regional attorney for the Miami District Office, said, "Many families shop at BJ's and would be shocked to discover it treats its employees this way. All employees are entitled to a workplace free from racism and bigotry."

BJ's e-mailed the following statement to cbs4boston.com Monday afternoon responding to the lawsuit.

"BJ's Wholesale Club takes any allegation of discrimination very seriously and does not tolerate discriminatory behavior of any kind against any Team Member. As this matter is in active litigation, we cannot comment on the specifics of the EEOC's claims."

"We value diversity in our organization, and we are committed to providing a workplace free of discrimination. We will continue to work with the EEOC to resolve this matter as expeditiously as possible."

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