On Sep 17, 2013, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Estimates for Staples have shown a downtrend since the company
reported disappointing second-quarter fiscal 2013 results on Aug
Staples continues to disappoint on the sales and profitability
front as decline in business and consumer spending in the wake of
the global meltdown and the deterioration of credit markets have
resulted in sluggish demand for big-ticket items.
Lower sales on account of store closures and fall in product
margins took a toll on the company's performance. The quarterly
earnings of 16 cents a share from continuing operations missed
the Zacks Consensus Estimate and decreased 15.8% year over year.
Total sales decreased 2.2% to $5,314.7 million and fell short of
the Zacks Consensus Estimate of $5,381 million.
The company's international operations remain a drag in the
quarter with sales waning 8.3% to $946 million, reflecting lower
revenue from Europe and Australia.
Going forward, we expect demand for office products to remain
soft. Moreover, margins are likely to remain under pressure owing
to the company's price investment and macroeconomic
Given the near-term challenges, the company lowered its
earnings and sales guidance for fiscal 2013. Staples now
envisions earnings to be in the range of $1.21-$1.25, down from
its earlier guidance range of $1.30 - $1.35. Moreover, total
revenue is expected to decline in the low single-digits compared
with its previous projection of low single-digits increase in
The dismal results triggered a downtrend in the Zacks
Consensus Estimates, as analysts become less constructive on the
stock's future performance. This is evident from the movement
witnessed in the Zacks Consensus Estimate that dipped 7.5% to
$1.23 for fiscal 2013 and 7.7% to $1.31 per share for fiscal 2014
in the past 30 days.
Other Stocks that Warrant a Look
Not all retail stocks are performing as disappointingly as
Staples. Other stocks worth considering include
Fortune Brands Home & Security, Inc.
) carrying a Zacks Rank #1 (Strong Buy), and
Dollar General Corporation
Ross Stores Inc.
) both sporting a Zacks Rank #2 (Buy).
DOLLAR GENERAL (DG): Free Stock Analysis
FORTUNE BRD H&S (FBHS): Free Stock Analysis
ROSS STORES (ROST): Free Stock Analysis
STAPLES INC (SPLS): Free Stock Analysis
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