Vizzini & Doug, you both seem to be forgetting that the $4/share of cash as well as other "quality" assets like inventory are mostly offset by liabilities. The company's "net current assets", a favorite measure of value investors like Mario Gabelli, is close to $1/share. To arrive at that, take current assets of $1,505 million and subtract current liabilities and long-term debt of $1,411 million, leaving about $94 million or $1.03 per share. Consider then that much of their inventory could almost be considered perishable (subject to loss of value from the passage of time). Gross margins the last six months were only 14% and part of the cost of sales is occupancy costs which are relatively fixed, so further discounting to reduce inventories (which, at $815 million, exceeded 47 days worth at Dec 26) could dramatically impact profit margins.
Now, I'm not saying they are insolvent or that they will ever be, but they aren't nearly as liquid as $4/share of cash might lead one to believe.
JM2Cents,
Bob |
