Foolish Forecast: Staples Takes It Easy

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Foolish investors will find out next week whether the "easy button" is still close at hand for Staples (Nasdaq: SPLS). Until now, the company has delivered remarkably consistent results, despite sluggish overall retail sales and stiff competition from OfficeMax (NYSE: OMX) and discounters like Wal-Mart (NYSE: WMT).

What the analysts say:
Of the 17 analysts covering Staples, a full 15 rate the stock either a buy or a strong buy, one better than last month. The CAPS community agrees, awarding the stock four stars out of five. Consensus analyst estimates suggest $0.47 in earnings per share for the fourth quarter, representing a 14.6% increase, excluding the extra week's results from last year's quarter.

What management says:
Management suggested last quarter that it anticipates 15% earnings growth, and envisions growth returning to 15% to 20% once the economy gets back on track. CFO John Mahoney told investors last quarter that management is patterning its steps to stabilize the business during the economic downturn on similar moves the company made during the 2001 recession.

According to Mahoney, "So while the economy is weak, we are taking the opportunity to get to work on the things we can control, focusing on our customers and new growth ideas that will drive outstanding results when the economy strengthens."

What management does:
Management's approach seems to be working quite well. You'd be hard-pressed to find a retailer that delivers more consistent operating margin performance over time.

Trailing Four Quarters	11/06	2/07	5/07	8/07	11/07
Comps Growth (Y-O-Y)	4%	1%	1%	(2%)	(3%)
Gross Margin	28.6%	28.6%	28.5%	28.6%	28.7%
Operating Profit	7.9%	8.1%	8.1%	8.1%	8.2%

Source: Capital IQ.

One Fool says:
Expect Staples to deliver the goods as always, unlike Office Depot (NYSE: ODP), which was sunk by a spending spree last quarter. But here's the bigger question: Will Staples win out in its $3.7 billion bid to acquire European rival Corporate Express (CE)? As fellow Fool Rich Smith noted last week, this appears to be a match made in heaven. Though CE management quickly voted thumbs-down on the deal, the economics appear compelling.

For related Foolishness:

• Mark One Up for OfficeMax
• Wal-Mart's Back in Its Element
• Another Dirt-Cheap Stock