Back to top

Analyst Blog

On Oct 3, 2013, Zacks Investment Research downgraded Staples, Inc. (SPLS - Analyst Report) 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 21, 2013. The company continues to disappoint on the sales and profitability front for the second consecutive quarter in the fiscal year, as decline in business and consumer spending in the wake of the global meltdown and the deterioration of credit markets have resulted in soft demand for big-ticket items.

Lower sales on account of store closures and lower product margins took a toll on the second quarter performance of Staples. The quarterly earnings of 16 cents a share missed the Zacks Consensus Estimate by a couple of cents and decreased 15.8% year over year. Total sales also declined 2.2% year over year to $5,314.7 million and fell short of the Zacks Consensus Estimate of $5,381 million.

Given the near-term challenges, the company lowered its earnings and sales guidance for fiscal 2013. Staples now expect earnings to be in the range of $1.21 to $1.25, down from its earlier guidance range of $1.30 to $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.

The lower-than-expected 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 fell 7.5% to $1.23 for fiscal 2013 and 7.7% to $1.31 per share for fiscal 2014 in the past 60 days.

Other Stocks That Warrant a Look

Not all retail stocks are performing as disappointingly as Staples. Other stocks worth considering in the retail sector, include Citi Trends, Inc. (CTRN - Analyst Report), DSW Inc. (DSW - Snapshot Report) and Lumber Liquidators Holdings, Inc. (LL - Snapshot Report), all sporting a Zacks Rank #1 (Strong Buy).

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
PLANAR SYST… PLNR 4.44 +5.21%
BITAUTO HOL… BITA 81.71 +5.12%
CTPARTNERS… CTP 16.66 +4.26%
CHINA BIOLO… CBPO 47.91 +3.30%
MALLINCKROD… MNK 72.94 +2.85%