Seeking Alpha

retailprodog's  Instablog

retailprodog
Send Message
Consultant with multi-industry experience. Spent last 13 years in footwear retail, marketing and manufacturing, running a 15,000 employee group. Active investor.
  • BJ's proposed buyout makes SKX look cheap! 1 comment
    Nov 11, 2010 1:49 PM | about stocks: SKX

    Leonard Green & Partners are apparently willing to pay over 20x p/e to buy BJ's at 2.5x book. BJ's has no international dimension and only $1 cash per share.
    Makes international footwear brand Skechers (NYSE:SKX) $21 look pretty cheap folks at 7x p/e, $8 cash per share and a 20%+ short interest. 
    There is talk of approaches by well known IB's, but I understand the Greenberg family would reject any buyout offer (though even a rejection wouldn't hurt the share price) since they feel they can grow Skechers to be the global #3 footwear company rather than just the US/Canada #2.
    Given the cash on the balance sheet an MBO would make more sense to the Greenbergs than an LBO.
    My understanding though is that the Greenbergs are so passionate about growing the top line internationally that they are reluctant to crimp prospective growth by loading the balance sheet with buyout debt.
    Since the family and trusts already own over $400 million in SKX stock I think they are right to choose the international expansion option over excessive financial engineering / MBO.
    As the COO indicated during the conference call, SKX will have a record cash balance at the end of the 1st qtr (about $8 to $9 per share) and they will address their options for the use of cash then. Given that SKX will again become a cash machine as they rebalance their toning inventories, they will likely announce a buyback at some point, which would boost EPS substantially.
    Per Sporstcan, October month toning up 5x y/y and headed to top $1 billion with SKX at 56% share and here comes Xmas. So much for the 'end of toning' thesis.



    Disclosure: long SKX
    Themes: BJ's Stocks: SKX
Back To retailprodog's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (1)
Track new comments
  • Amvona
    , contributor
    Comments (232) | Send Message
     
    Thanks for the great article and addtional reasoning - all very good points. You migth also like this post:

     

    www.amvona.com/blog/tw...

     

    Amvona.com
    18 Nov 2010, 06:50 AM Reply Like
Full index of posts »
Latest Followers

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.