To: Tom D who wrote (3656 ) 4/29/1998 5:20:00 PM From: Oeconomicus Respond to
Tom, you guys give us a hard time for making the same old valuation arguments and here you are arguing again that BKS and BGP are borderline insolvent - the weight of all those stores and the associated "debt" means that they are really destroying value and therefore can't compete with the financially strong AMZN ... blah, blah, blah. Tom, just because you read it in some analyst's report doesn't make it true. The fact is that BKS produced a return on equity of almost 14% over the last 12 months, has almost half a billion dollars of book equity and has financial resources available to it the size and terms of which make AMZN's deals look like small time, overly expensive junk. If I were a shareholder of BKS, I would be very pleased, not worried, that they lease most of their stores - let someone else risk their capital on real estate. If you have some evidence that they are improperly classifying lease obligations to keep them off the balance sheet, I suggest you buy some BKS puts and post the evidence. As for the WACC thing, post the analysis - either it has lost something in translation or the analyst is terribly confused.
