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  • soylaberga soylaberga Dec 7, 2011 8:49 AM Flag

    from 2007 to 2011

    I would agree that if it were for AZO they would purchase the float down to 10M, after all how else will they grow their EPS?
    That said, the slight issue with that argument is they need money to buy shares, vendors are already financing their inventory (by about $300M). $3.5B in debt with $1.3B in cash flow.
    I am sure they'll figure out a way. Oh I know, Brazil!

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    • AZO has some of the most stable and highest gross margins in retail. No need to put starters and brake pads on clearance or 25% off, or 10% off.. People either need them or they don't.

      PM has $3.9 billion of equity, the market cap of PM is $131 billion... so that's about two bucks per share of equity against a $75 stock... PM has great, and stable cash flows. People don't value PM on book value. People don't value AZO on book value.

      AZO has great, and stable cash flows as well. AZO's debt is well laddered. Free cash flow could cover any debt in the future if share repurchases are suspended, but why suspend them if you don't have to. That's the fallback plan. And behind that, AZO could borrow from ESL or Lampert personally. Guys like him don't sit and watch billion dollar investments go up in smoke because of a lack of funding.

      • 2 Replies to robert_townsend2
      • So the question is, does Eddie die first or his other collusion buddies who are in this Ponzi scheme bail before that? Just have to wait and watch. When this one falls, watch the heck out.

        I see no value here; no growth, no more buyback (you can only buy so much) and no-one willing to take over the Ponzi scheme. It's a failed model for for satisfying the going-concern concept.

      • Agree free cash flow will be able to cover current future commitments. They are on the hook for $6.1B of which $4.2B is due within 5 years. This is just to keep the lights on. If they want to expand (either commercial segment or international) they will need money, even more if they want to buy more shares.
        I didn't say anyone values AZO at book value, clearly they don't since its negative...IMO they value on EPS growth, what happens when the music stops?

        And no discussion here of Pension plan under funding, and we assume growth continues at current abnormal pace and that competition doesn't heat up (the latter is the reason why AZO will eventually have lower margins IMO).

        I would speculate that ESL may focus on SHLD following the AZO model, on that retailer they have $43B in revs (vs. $8B here) once they cut cost to the bone they can use cash flow and lever least that company still has positive shareholder equity.

        We'll see, hey the US has $15T in debt and its still ticking, maybe AZO has some tricks under its sleeve, in the long term though it all ends up the same. What did that Keynes guy say "Markets Can Stay Irrational Longer Than Investors Can Stay Solvent"

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