Staples (Nasdaq: SPLS ) may be the "savviest office-supplies retailer" to some, but third-quarter results released earlier this week indicate that its sales may yet fall into the Mariana Trench.
The leading office-supply company managed to eke out a sales increase of 3% even without the assistance of its Corporate Express acquisition. However, profits plummeted 16% to $0.21. Management's leading indicator, same-store sales, resumed their downward slope, falling 7% in the quarter. While some may say that's not much worse than the twin 6% declines of the last two quarters, it certainly doesn't suggest good times are on the horizon.
There's certainly trouble in the office retail space; OfficeMax (NYSE: OMX ) and Office Depot (NYSE: ODP ) reported similarly distressed results in July. Yet unlike its rivals, Staples still has a buoy it can cling to.
The Corporate Express acquisition added more than $673 million in total sales to Staples' results, boosting the North American delivery business top line by nearly 25% and increasing the international segment by 70%. While such large acquisitions rarely go smoothly, the merger's effect on both revenue and earnings ensures that the company will maintain its dominant position.
Still, despite the international success from Corporate Express, comparable sales fell 7%. Europe may be beginning to enter its own recession growth, while the U.K. basically came to a halt in the second quarter and many analysts are expecting it to contract in the third. The European economies as a whole dropped 0.2% in the second quarter. So much for betting on the European acquisition to aid Staples in its recovery stage.
Thus, the fact that Staples earns 80% of its sales here at home may not be such a good thing, given our economic malaise. While I wouldn't nail any predictions of a turnaround to the mast just yet, with the dollar strengthening against the euro, a recovering U.S. economy will catch the retailer's sails like a strong breeze. We may just have to ride out the storm for awhile longer before we can look at Staples' turnaround and say, "That was easy."
See what's in store with these related Foolish articles:
RSS Headlines
Fool UK