Tom, you sound like more of a broken record than us bears.
You keep repeating some comment from BKS' Q1 '97 conf call - who cares? Besides, did you ever consider that with its much greater purchasing power, and resulting higher gross margins, a hundred million of online sales may not "negatively effect its operating results"?
You keep claiming that BKS (and BGP) are financially weak companies - perhaps you should have squeezed in a few business courses among all the pre-med and med school ones. I think we've had this argument before, but it may have been someone else, so I'll try to be nice.
Cash balances at the end of a quarter mean nothing. If BKS wanted to, they could draw down a hundred million of the $445 million undrawn availability under its bank line (which, BTW, is priced at 5/8% over LIBOR right now; at what rate does AMZN borrow?) to appear even more liquid than they really are, but most analysts (credit that is; not so sure about investment ones) are smarter than that. BTW, you claim that "for some reason(?)" BKS "does not disclose cash levels". Statements like that make it hard to be polite, so I'll just say look at their 10-Q like everyone else does.
The important things to consider when evaluating liquidity of BKS or AMZN or anyone else are Net Working Capital and what they all refer to in 10-Qs and Ks as "Capital Resources". BKS had, on 11/1/97, $327 million of net working capital or ten times what AMZN had at the end of its third quarter. In addition, BKS has the $850 million line of credit which was less than half drawn ($445mm available) going into their strongest quarter. Explain to me again how AMZN is more liquid.
As for store leases, would they be stronger if they owned all that real estate, complete with the associated risks and debt? I'd much rather they had the flexibility to relocate or close stores without worrying about unloading the real estate. Besides, the choice between rent vs depreciation, principal and interest is pretty much irrelevant in the grand scheme of things (cash flow that is).
If you want to argue the inventory question too, consider this - BKS and BGP carry large amounts of inventory in their stores and the distribution centers that feed them, yes. That does not mean that they have to carry inventory for the online business at the same turnover ratios. In fact, they can probably make more efficient use of their existing inventory levels, i.e. the levels required to support the stores, just by having an additional (online) channel for selling. In other words, the marginal inventory needed to support $100 of online sales for BKS is probably less than for AMZN. Plus, BKS has more titles in stock for immediate delivery.
Face it Tom, the competitors you mistakenly dismiss as no threat are, in fact, financially much stronger than AMZN AND should enjoy substantial cost advantages over AMZN as well.
Regards,
Bob
PS: You do realize that the entire float AND the entire short interest of AMZN stock turned over in the last two days. A whole passel of institutions and insiders used a purely coincidental <G> short squeeze to unload a few million shares of stock onto panicked shorts and unwitting, greedy small investors (greedy in that their overwhelming desire for a quick buck won out over common financial sense). |
