Autozone Inc case

Ratios will improve when a stock repurchase is completed as long as performance in the company is maintained.

What are the specific improvements to various ratios Autozome Inc Case? What happened to the dividends after the repurchase happened?

Exhibit 3

Exhibit 4

Autozone, Inc. On February 1, 2012, Mark Johnson, portfolio manager at Johnson & Associates, an asset management company, was in the process of reviewing his largest holdings, which included AutoZone, an aftermarket auto-parts retailer. AutoZone shareholders had enjoyed strong price appreciation since 1997, with an average annual return of 11.5% (Exhibit 1). The stock price stood at $348, but Johnson was concerned about the recent news that Edward Lampert, AutoZone's main shareholder, was rapidly liq- uidating his stake in the company Since 2004, AutoZone shareholders had received large distributions of the com- pany's cash flows in the form of share repurchases. When a company repurchased its own shares, it enhanced earnings per share by reducing the shares outstanding, and it also served to reduce the book value of shareholders' equity (see AutoZone financial statements in Exhibits 2, 3, 4, and 5). Johnson felt that Lampert was likely a driving force behind AutoZone's repurchase strategy because the repurchases started around the time Lampert acquired his stake and accelerated as he built up his position. Now that Lampert was reducing his stake, however, Johnson wondered if AutoZone would continue to repurchase shares or if the company would change its strategy and use its cash flows for initiating a cash dividend or reinvesting the cash in the company to grow its core business. In addition, given its large debt burden (Exhibit 6), AutoZone could choose to repay debt to improve its credit rating and increase its financial flexibility With AutoZone potentially changing its strategy for the use of its cash flows, Johnson needed to assess the impact of the change on the company's stock price and then decide whether he should alter his position in the stock. The AutoParts Business Aftermarket auto-parts sales were split into the Do-It-Yourself (DIY) and Do-It-For-Me (DIFM) segments. In the DIY segment, automobile parts were sold directly to vehicle Autozone, Inc. On February 1, 2012, Mark Johnson, portfolio manager at Johnson & Associates, an asset management company, was in the process of reviewing his largest holdings, which included AutoZone, an aftermarket auto-parts retailer. AutoZone shareholders had enjoyed strong price appreciation since 1997, with an average annual return of 11.5% (Exhibit 1). The stock price stood at $348, but Johnson was concerned about the recent news that Edward Lampert, AutoZone's main shareholder, was rapidly liq- uidating his stake in the company Since 2004, AutoZone shareholders had received large distributions of the com- pany's cash flows in the form of share repurchases. When a company repurchased its own shares, it enhanced earnings per share by reducing the shares outstanding, and it also served to reduce the book value of shareholders' equity (see AutoZone financial statements in Exhibits 2, 3, 4, and 5). Johnson felt that Lampert was likely a driving force behind AutoZone's repurchase strategy because the repurchases started around the time Lampert acquired his stake and accelerated as he built up his position. Now that Lampert was reducing his stake, however, Johnson wondered if AutoZone would continue to repurchase shares or if the company would change its strategy and use its cash flows for initiating a cash dividend or reinvesting the cash in the company to grow its core business. In addition, given its large debt burden (Exhibit 6), AutoZone could choose to repay debt to improve its credit rating and increase its financial flexibility With AutoZone potentially changing its strategy for the use of its cash flows, Johnson needed to assess the impact of the change on the company's stock price and then decide whether he should alter his position in the stock. The AutoParts Business Aftermarket auto-parts sales were split into the Do-It-Yourself (DIY) and Do-It-For-Me (DIFM) segments. In the DIY segment, automobile parts were sold directly to vehicle