Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We maintain our Neutral recommendation on Staples Inc (SPLS - Analyst Report), with a target price of $13.00, as the lingering macroeconomic concerns and sluggish job market continues to deter the sales of this leading retailer of office products and services.

However, it is encouraging to observe the company’s focus on augmenting store productivity to generate incremental sales per store, accelerating growth in adjacent categories, efforts towards enhancing market share in core office supplies and streamlining its cost structure.

As the recovery in the economy remains slow, consumers and small businesses remain frugal about big-ticket spending like business machines and other durables. Therefore, we believe that the demand for office products is likely to remain soft as performance of the sector is correlated to the health of the economy.

Consequently, Staples is making investments in the highly fragmented North American retail market to expand its business technology, and copy and print services that generate higher profit margins.

Moreover, the company is focusing on innovative products and services and has entered into a partnership with Martha Stewart Living Omnimedia Inc (MSO - Snapshot Report) and Avery Dennison Corporation’s (AVY - Analyst Report) office and consumer products group for retailing a new line of products.

Further, Staples has been actively managing its cash flows, returning much of its free cash to shareholders via dividend and share repurchases. During the second quarter of 2012, Staples repurchased 12.1 million shares for $159 million, and in the 26-week period ended July 28, 2012, distributed $148.5 million through cash dividends. Management now expects to generate free cash flow of over $1 billion in fiscal 2012.

However, the company faces stiff competition from office supply retailers, such as OfficeMax Inc. and Office Depot Inc. (ODP - Analyst Report), and warehouse clubs such as Costco Wholesale Corporation (COST - Analyst Report), discount stores, mass merchandisers such as Wal-Mart Stores Inc (WMT - Analyst Report), computer and electronics superstores on attributes such as store format, pricing strategy and in-stock consistency. This may weigh upon the company’s results.

Currently, Staples holds a Zacks #4 Rank, which translates into a short-term Sell rating as the sluggish macroeconomic environment acts as short-term deterrent.

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

Learn more

Start for as little as $4.50 per trade.

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
ANI PHARMACE ANIP 29.00 +13.50%
ATLAS FINANC AFH 14.57 +2.32%
FEDERATED NA FNHC 20.30 +2.16%
BIO PATH HOL BPTH 2.75 +1.48%
GREEN PLAINS GPRE 29.33 +1.31%