We have maintained our long-term recommendation on the leading
office products retailer
Why the Reiteration?
Staples' second-quarter fiscal 2013 results disappointed. Both
the top and bottom line missed the Zacks Consensus Estimate while
decreasing 2.2% and 15.8%, respectively. This Zacks Rank #4
(Sell) company lowered its earnings and sales guidance for fiscal
2013. Staples now expects earnings to be in the range of $1.21 -
$1.25 per share, down from its earlier guidance of $1.30 - $1.35.
Moreover, total revenue is expected to decline in the low
single-digits compared with its earlier guidance of low
single-digits increase in sales.
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
However, it is not only Staples that is passing through
difficult times. On the whole, the office supply retailers are
going through a rough patch as decline in business and consumer
spending in the wake of the global meltdown has resulted in
sluggish demand for big-ticket items.
Moreover, increased competition from online rivals like
) is taking a toll on their profitability. Amid such a scenario,
the company's close competitors,
Office Depot Inc
) decided to merge their businesses in order to capture a wider
market and generate incremental revenues.
Staples, on the other hand, has shifted focus toward improving
store productivity, accelerating growth in adjacent categories,
increasing market share in core office supplies and streamlining
its cost structure, which we believe would benefit the company as
the economy rebounds and consumer spending increases.
Additionally, Staples is focusing on the delivery business,
which requires less capital and generates higher margins. This
could prove to be a game changer for the company in the long
AMAZON.COM INC (AMZN): Free Stock Analysis
OFFICE DEPOT (ODP): Free Stock Analysis
OFFICEMAX INC (OMX): Free Stock Analysis
STAPLES INC (SPLS): Free Stock Analysis
To read this article on Zacks.com click here.