Mr. Wedgeâ€™s departure raises troubling questions about the companyâ€™s performance. Same store sales have been lackluster of late, but last weekâ€™s earnings announcement was ahead of expectations and management expressed optimism regarding Q4. I have a sinking feeling that another shoe may drop before a buyer comes along. Given the 25% runup in the past 2 months, now looks like a good time to follow Mr. Wedge out the door and say goodbye to BJâ€™s
Today, BJ’s dramatically lowered its guidance for the fourth quarter:
Based on management’s current forecast for fourth quarter sales and margin results and the establishment of the various reserves referred to above, the Company has lowered its earnings guidance for the fourth quarter of 2006 to a range of $.17 to $.25 per diluted share. The Company’s previous guidance for the fourth quarter, issued on November 14, 2006, was for diluted earnings per share of $.83 to $.87.
Eight days after the company provided guidance on November 14, the CEO resigned. Though we can only speculate, it seems reasonable to believe that it was already clear at that point that guidance would not be met. So we now have a pretty good idea of why Mr. Wedge left. The only question is, how many other shoes are in BJ’s closet?
Though the stock closed down 4% today(1/4/06) to $30.55, it still trades above where it was when Wedge resigned. BJ’s continued profitability, valuable real estate and strong balance sheet will continue to place a floor on share prices, but I believe it is below current levels. I sold my BJ’s shares on 11/22 and will continue to stay on the sidelines.
Disclosure: I have no position in BJ