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Staples, Inc. reported in-line earnings for the third straight quarter, when the company reported fourth-quarter fiscal 2016 results. This office supplies retailer posted adjusted earnings of 25 cents a share that met the Zacks Consensus Estimate but declined 4% from the year-ago period. Management projects first-quarter fiscal 2017 earnings in the range of 15–18 cents a share. The current Zacks Consensus Estimate for the quarter is pegged at 16 cents.
The company’s total sales declined 2.9% year over year to $4,560 million, and also lagged the Zacks Consensus Estimate of $5,025 million. Stiff competition and sluggish demand for paper-based office products due to technological advancements remain major concerns for Staples.
Concurrent with the earnings release, the company announced that it has completed the sale of UK retail business and operations. Moreover, during the fourth quarter, Staples also reached an agreement to sell a controlling interest in remaining European operations and also completed the sales of the same in Feb 2017. Further, the company announced the buyout of an independent office products dealer, Acquired Capital Office Products.
Moreover, Staples continued with its plan to close stores in North America. In the reported quarter, the company shuttered 13 outlets, while it has closed 48 stores year to date. Additionally, it has plans to close at least 70 stores in North America during 2017.
Staples’ adjusted operating income came in at $243 million compared with $261 million in the year-ago quarter. Operating margin contracted 21 basis points (bps) to 5.3%.
Following the result, the company’s shares are down almost 2% during pre-market trading session. We noted that the stock has declined 9.3% in the past three months, underperforming the Zacks categorized Retail-Miscellaneous/Diversified industry's decrease of 7.7%.
Segment Details
Following, the implementation of Staples’ 20/20 strategic plan, the company changed business segment to North American Delivery and North American Retail.
North American Delivery sales dipped 1.2% to $2,649 million, while comparable sales increased 1%. Growth witnessed across facilities supplies, breakroom supplies, and technology products, were partly offset by declines in ink and toner as well as office supplies.
Operating income came in at $168 million, flat year-over-year. Operating margin expanded 10 bps to 6.4%.
Sales at North American Retail declined 8.2% to $1,649 million on account of store closures. Comparable sales fell 7%. The company witnessed sales decline across ink and toner, business machines, technology accessories and mobility, which were partly mitigated by growth registered in print and marketing services.
Operating income tumbled 6.6% to $99 million, while operating margin expanded 11 bps to 6%.
Other Financial Details
Staples ended the quarter with cash and cash equivalents of $1,137 million, long-term debt of $529 million, and shareholders’ equity of $3,688 million, excluding non-controlling interest of $8 million.
For the 52-week period ended Jan 28, 2017, net cash provided by operating activities was $934 million and the company spent $255 million on the buyout of property and equipment, thus resulting in free cash flow generation of about $679 million. The company anticipates generating free cash flow of at least $500 million in fiscal 2017.
Kate Spade & Company delivered an average positive earnings surprise of 14.6% in the trailing four quarters and has a long-term earnings growth rate of 28.3%.
DSW delivered an average positive earnings surprise of 21.7% in the trailing four quarters and has a long-term earnings growth rate of 6.8%.
Genesco delivered an average positive earnings surprise of 31.4% in the trailing four quarters and has a long-term earnings growth rate of 9.5%.
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Staples (SPLS) Q4 Earnings Meet Estimates; Issues Guidance
Staples, Inc. reported in-line earnings for the third straight quarter, when the company reported fourth-quarter fiscal 2016 results. This office supplies retailer posted adjusted earnings of 25 cents a share that met the Zacks Consensus Estimate but declined 4% from the year-ago period. Management projects first-quarter fiscal 2017 earnings in the range of 15–18 cents a share. The current Zacks Consensus Estimate for the quarter is pegged at 16 cents.
The company’s total sales declined 2.9% year over year to $4,560 million, and also lagged the Zacks Consensus Estimate of $5,025 million. Stiff competition and sluggish demand for paper-based office products due to technological advancements remain major concerns for Staples.
Staples, Inc. Price, Consensus and EPS Surprise
Staples, Inc. Price, Consensus and EPS Surprise | Staples, Inc. Quote
Concurrent with the earnings release, the company announced that it has completed the sale of UK retail business and operations. Moreover, during the fourth quarter, Staples also reached an agreement to sell a controlling interest in remaining European operations and also completed the sales of the same in Feb 2017. Further, the company announced the buyout of an independent office products dealer, Acquired Capital Office Products.
Moreover, Staples continued with its plan to close stores in North America. In the reported quarter, the company shuttered 13 outlets, while it has closed 48 stores year to date. Additionally, it has plans to close at least 70 stores in North America during 2017.
Staples’ adjusted operating income came in at $243 million compared with $261 million in the year-ago quarter. Operating margin contracted 21 basis points (bps) to 5.3%.
Following the result, the company’s shares are down almost 2% during pre-market trading session. We noted that the stock has declined 9.3% in the past three months, underperforming the Zacks categorized Retail-Miscellaneous/Diversified industry's decrease of 7.7%.
Segment Details
Following, the implementation of Staples’ 20/20 strategic plan, the company changed business segment to North American Delivery and North American Retail.
North American Delivery sales dipped 1.2% to $2,649 million, while comparable sales increased 1%. Growth witnessed across facilities supplies, breakroom supplies, and technology products, were partly offset by declines in ink and toner as well as office supplies.
Operating income came in at $168 million, flat year-over-year. Operating margin expanded 10 bps to 6.4%.
Sales at North American Retail declined 8.2% to $1,649 million on account of store closures. Comparable sales fell 7%. The company witnessed sales decline across ink and toner, business machines, technology accessories and mobility, which were partly mitigated by growth registered in print and marketing services.
Operating income tumbled 6.6% to $99 million, while operating margin expanded 11 bps to 6%.
Other Financial Details
Staples ended the quarter with cash and cash equivalents of $1,137 million, long-term debt of $529 million, and shareholders’ equity of $3,688 million, excluding non-controlling interest of $8 million.
For the 52-week period ended Jan 28, 2017, net cash provided by operating activities was $934 million and the company spent $255 million on the buyout of property and equipment, thus resulting in free cash flow generation of about $679 million. The company anticipates generating free cash flow of at least $500 million in fiscal 2017.
Stocks to Consider
Staples currently carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the retail sector include Kate Spade & Company , DSW Inc. and Genesco Inc. (GCO - Free Report) , all the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kate Spade & Company delivered an average positive earnings surprise of 14.6% in the trailing four quarters and has a long-term earnings growth rate of 28.3%.
DSW delivered an average positive earnings surprise of 21.7% in the trailing four quarters and has a long-term earnings growth rate of 6.8%.
Genesco delivered an average positive earnings surprise of 31.4% in the trailing four quarters and has a long-term earnings growth rate of 9.5%.
8 Stocks with Huge Profit Potential
Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>