Autozone Case Study Analysis

1390 Words 6 Pages
Register to read the introduction… Lampert has been reducing his stakes gradually for the last 3 years (Appendix - Figure 1) although AZO continued to buy back its shares. As Lampert has decided to en-cash his stocks, would AZO use its free cash flow elsewhere? Appreciation in the AZO’s stock cannot solely be attributed to share repurchase. Economic condition has also been favourable to AutoZone’s sales. Even though, the cash flow from operating expenses has been steady for the last five years, the growth has declined from 29% to 7.9% .This could be a sign for economic recovery.
Share repurchases act is when a company uses its cash to buyback share from the market and reduce the number of shares outstanding. This is another form of investing the firm’s cash within the firm. AZO has been financing its share repurchase through issuing debt. Large accumulation of debt has resulted in shareholders’ deficit. This might affect the flexibility of the company. If AZO decides not repurchase shares this year then it can use the cash to pay back its creditors and upgrade its rating (Moody’s and S&P’s Baa and BBB rating respectively). In the short-run share repurchases might look good in order to increase the share price in the market and increasing the Earnings Per Share of the stock. Even though the act of share repurchases might be an elusive move, no doubt that it is
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There is always a first mover advantage that AutoZone could capture in the Brazil market. AutoZone had already captured the market in Mexico, Canada and Puerto Rico.Yet again, autoparts industry seems to have slowed down its number of store in the last year but the distance travelled by light trucks has remained the same while the average age of these vehicles has increased (Appendix - Figure 4 & 5). This means that these vehicles require maintenance in the long run. Also, AutoZone could be the first to capture new …show more content…
This could be a crucial phase not just for Johnson but also for AutoZone all together. Consecutive increase or decrease in the Share Price of the firm will decide the growth prospective of the firm and of the market as well.
That being said, Johnson could hold or buy more share of AutoZone with an increase in the Share Price of AutoZone or sell the shares with an immediate fall in the price. Somehow, I feel that the share price of the firm is overpriced and a small decrease in the price will pull down the entire volume of the stock. To quote, Johnson is stuck between the “hard and the rock”

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