) recently posted sluggish second-quarter 2012 results. The
quarterly earnings of 18 cents a share missed the Zacks Consensus
Estimate of 22 cents and decreased 18% from the prior-year quarter.
Including one-time items, earnings decreased 25% year over
Staples reported total sales of $5,498.5 million, down 6% year
over year and well below the Zacks Consensus Estimate of $5,721
Given the sluggish results, management reduced its earlier
guidance and now expects sales for fiscal 2012 to remain flat
compared with the prior year, while the bottom line is expected to
increase in low single digits.
Gross profit for the quarter decreased 7.3% to $1,427.3 million,
while gross margin contracted by approximately 50 basis points to
26%. Operating profit decreased by approximately 21% to $220.1
million, whereas operating margin contracted 78 basis points to 4%,
reflecting deleveraging of fixed expenses and lower product
North American Delivery
sales inched down 1% (in U.S. dollars) year over year to $2,412.8
million. The revenue decreased on account of absence of two large
contract customers. However, this was offset by sales increases in
facilities and breakroom supplies coupled healthy growth in the
sales of promotional products. Operating margin decreased 72 basis
points to 7.7%, reflecting lower product margins.
North American Retail
sales fell 3% at $1,989.1 million during the quarter.
Comparable-store sales decreased 2%, reflecting no change in the
average order size along with 2% decline in customer traffic.
Operating margin decreased 59 basis points to 4.4%.
During the quarter, the company opened 4 stores and closed 5 in
the U.S. Further, Staples opened two stores in Canada, ending the
quarter with 1,915 stores in North America.
plunged 18% (in U.S. dollars) year over year to $1,096.6 million,
reflecting a decrease of 9% in comparable-store sales in Europe
coupled with sluggishness in Australia. The segment reported an
operating loss during the quarter, due to deleveraging of fixed
expenses Europe and Australia and decrease in product margins in
During the quarter, the company closed one store, bringing the
total number of international stores to 375.
Other Financial Details
The company ended the quarter with cash and cash equivalents of
$984.7 million, long-term debt of $1,542.6 million and
shareholders' equity of $6,789.7 million, excluding non-controlling
interests of $7 million. Year-to-date, Staples generated operating
cash flows of about $257 million and incurred capital expenditures
of $126 million.
The company generated free cash flow of $131 million and expects
to generate more than $1 billion of free cash flow in fiscal 2012.
During the reported quarter, Staples repurchased 12.1 million
shares for $159 million.
Currently, we prefer to maintain a long-term Neutral rating on
the stock. Moreover, Staples which competes with
Office Depot Inc
), has a Zacks #3 Rank, which translates into a short-term Hold
OFFICE DEPOT (ODP): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
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