Wednesday, November 29, 2006

What's Next for BJ's??

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

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?

Tuesday, November 28, 2006

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.

Sunday, November 26, 2006

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

Wednesday, November 22, 2006

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.