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Staples, Inc. Message Board

  • Yukra Yukra Dec 22, 1999 5:50 PM Flag

    Financial situation has changed

    Has anyone thought about how the change in
    financial health at SPLS might explain the collapse in
    stock price recently. Compare the cash and LT debt
    situation in the recent 10Q with a year ago. SPLS has used
    about $400M in cash and taken on another $400M in new
    LT debt to fund recent acquisitions. This might
    explain the recent skittishness as some might knee-jerk
    to this as an indication of souring business

    IMHO this is not a reason to be concerned
    fundamentally. Business seems to be running well and cash flows
    are not only enough to service (and pay down) the
    debt but also to rebuild the spent cash over the
    coming year or so.

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    • good point. It's hard to tell what spooks the
      street at any given moment. On the other hand, a growth
      company that DOESN'T take on some debt to grow the
      company would make me even more skittish!

      I think
      the year over year performance of SPLS ultimately
      settles the issue by indicating very good growth
      comensurate with the assumed debt, and of course excellent
      corporate management.

      It's hard to ignore a year
      long slump. And it tends to lead people to belive that
      there's something out there we don't know about. There
      are no secrets kept that long! We all have the same
      information that Wall Street does on SPLS. It's just a
      "market thing" we have to endure, or better yet, take
      advantage of by buying up more. You can either let an
      unwarranted slump piss you off, or make you more money. I
      choose the latter!

      SPLS after hour trade 20 5/8
      on the CNBC ticker. That's at least some relief! :)

      • 3 Replies to anazlyer
      • I would've bet on SPLS being back up in low 30's
        by now, great earnings and this is their strongest
        quarter, back to school etc.

        Suprised it's still
        way down here at 20. I'd be expecting SPLS to pop
        back to mid 20's soon; I'm almost always right on my
        stock picks, eg OMPT CMRC QCOM but SPLS seems to be
        lagging. I hope is gets back up soon. Look at NOVL
        recently, my other favorite daytrading stock. It just had a
        big run; hoping SPLS will too.

        Good luck SPLS
        folks. Hmm...this one would've been in my investment
        portfolio if I'd kept one (but I'm a

        Well, take it easy.

      • True that some debt is good to make a company
        grow. My only issue with debt is that it dilutes my
        stake as a shareholder (those nasty Debt/Equity and
        cash/debt ratios comes into play here). If high amounts of
        debt are allowed to hang around then the ownership
        stake of the shareholder is reduced and transferred to
        the bondholder. Since my stake as a shareholder is
        reduced I would expect the value the "street" places on
        my stake to be reduced. What has happened recently
        at SPLS would seem to indicate this (although the
        situation at BBY, which is also way off its recent highs,
        is much stronger than a year ago...).

        earnings and cash flows at SPLS are far more than needed
        to deal with the debt situation and since the notes
        are due by 2002 it would seem that the company is not
        planning on leaving my stake diluted for too much longer.
        Accordingly, I feel comfortable taking a stake at these

        BTW, I am long 200 at 21 and have written 3 March puts
        at a strike of 17.5, just in case the street thinks
        I am crazy for believing as I do. ;-)

      • I agree that a cos. taking on debt to expand
        itself is useful as long as it is done responsibly. In
        the case of Staples where expansion of the business
        from B&M to .com is the objective this was a normal
        business move. The fact that the debt load is manageable
        given the revenue and cash flow is a good sign. The
        interest on the debt, however, is a bit disconcerting. I
        would not expect an established business to get
        basically a homeowner's rate of 7.75%. By contrast T, with
        a much higher Debt/Equity ratio, can manage 5.5%
        for its debt issues. Is this higher rate normal for a
        co. of SPLS's size?

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