Last week I lamented about Home Depot’s buyback begging for “details boys… details”
Execs at Home Depot (HD) should read Best Buy’s (BBY) announcement today. In announcing a $5.5 billion share repurchase, Best Buy said it has used a portion of this new share repurchase program immediately to execute an accelerated share repurchase program, with Goldman Sachs(GS) as counterparty, for the buyback of $3 billion of stock no later than February 2008. The company expects to fund the $3 billion ASR program through cash, short-term investments and interim borrowing.
The remaining $2.5 billion available under the new share buyback program is
expected to be used subject to business results, market conditions and board
approval.
Now, let’s ignore the the last $2.5 billion because there is no time frame when and if it will ever be accomplished. What we do know is that $3 billion dollars worth of stock will be gone in 8 months. At todays prices that means about 65 million shares or about 13% of the outstanding shares. We can now count on this giving 2008 (year ending March 2008)EPS a boost of 37 cents a share (13%) over 2007. This number assumes earning in 2008 equal to 2007. Any growth Best Buy delivers in excess of 2007 is just icing on the cake for investors.
In the most recent earnings announcement CEO Brad Anderson said “In addition, as seen in the first quarter, we anticipate continuing our increased share repurchase activity.”
Guess he meant what he said. for Home Depot investors, I hope CEO Frank Blake is paying attention.
3 replies on “How To Announce A Buyback: Best Buy”
Consumer sentiment and real estate demand is at record low so whatever BBY does would not avert the impending disaster….
I own HD and I prefer their method a lot more than Best Buy’s. In Best Buy’s case you will have a lot of short-term traders that will jump on the stock, force it up, and BB will be buying at a higher price – hurting shareholders.
HD’s announcement leaves short-term traders in the dark. In effect, HD can purchase shares without having the prices artificially run up, and long-term shareholders will benefit.
BB: How NOT to announce a buyback.
home depot did not make a buyback announcement. they announce their intention to buy back shares which mean nothing..
until they announce details, there is no buyback…
the only buybacks that are are finished are the ones that specify a time frame to complete them, otherwise is is just a nice press release.