Back to top

Analyst Blog

We have maintained our long-term recommendation on the leading office products retailer Staples Inc. (SPLS - Analyst Report) at Neutral.

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 headwinds.

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 Amazon.com Inc. (AMZN - Analyst Report) is taking a toll on their profitability. Amid such a scenario, the company’s close competitors, Office Depot Inc. (ODP - Analyst Report) and OfficeMax Incorporated 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 run.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.80 +7.04%
BANCO DO BR… BDORY 14.74 +5.66%
AIR INDUSTR… AIRI 9.99 +4.15%
EQT MIDSTRE… EQM 98.14 +3.38%
WEATHERFORD… WFT 23.64 +3.10%