Autozone Inc

AutoZone, Inc.

TO: Johnson and his associates

DATE: 1st of February, 2012

SUBJECT: AutoZone Inc Expected Performance

AutoZone, Inc.

TO: Johnson and his associates

DATE: 1st of February, 2012

SUBJECT: AutoZone Inc Expected Performance

Table of Contents

1. Main issues……………………………………………………………………………3

2. Recommendations…………………………………..……………………………….3

3. Quantitative Analysis……………………………………………………………..….5

4. Qualitative Analysis…………………………………………………………………..6

5. Plan of action………………………………………………………………………….9

6. Appendix……………………………………………………………………………...11

Main issues

* Should Johnson be worried if AutoZone decides to change strategies and start giving dividends instead of repurchasing shares?

* Should Johnson alter his position in the stock or remain at the same position?

* Will an international expansion benefit Johnson’s stocks?

Recommendations

* Given that AutoZone’s stock has been increasing over the years with their share repurchasing program, Johnson should keep investing in AutoZone even if they decide to switch to a dividend payout strategy instead of stock repurchases keep their current strategy.

* Expanding internationally would create value to the company and help the stocks increase but AutoZone’s management is not ready for an expansion

Quantitative Analysis

Assumptions and key variables

The level of sales growth will be increasing at a rate of 10 % year over year based on the average past performance.

Variable cost will remain a at 50% of sales, selling and administrative expense will remain at past level of 33% of sales.

Treasury stock will be completely retired and the strong cash flows will be used to gradually pay down the debt and issue dividends.

Balance sheet items have been forecasted to reflect changes based on past averages.

Excess cash will be used to pay...