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Bear of the Day

Zacks Equity Research

School Specialty (SCHS)

Trades from $3

The recent economic downturn has resulted in uncertainty related to state budget funding levels in school districts, subsequently leading to a cautious spending approach. Consequently, School Specialty (SCHS) has been registering a persistent decline in the top line.

Softness in demand still continues for both curriculum-based products and supplemental materials. The furniture market has been the worst hit by budget cuts, as school construction and modernization projects have been cancelled or postponed. To mitigate this, School Specialty has launched new furniture product lines at compelling prices.

However, we believe aggressive pricing may weigh upon margins. Given sustained pricing pressure and lower-than-expected second-quarter results the company now expects to deliver a loss per share between $0.30 and $0.60 for fiscal 2011.