Why Staples Shares Slumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of office supply retailer Staples (NASDAQ: SPLS  ) sank 13% today after its quarterly results and outlook missed Wall Street expectations.

So what: The stock has soared over the past year on continued market share gains in the U.S., but today's second-quarter results -- income fell 15% on a revenue slip of 2% -- coupled with downbeat full-year guidance reignites concerns over its struggles abroad. In fact, international sales in the quarter fell 8.3% over the year-ago period, suggesting that its business model is a bit more sensitive to global weakness than analysts had thought.

Now what: Management now sees full-year operating EPS of $1.21 to $1.25 and a revenue decline in the low single digits, well below its prior view of $1.30 to $1.35 in earnings and a revenue increase in the low single digits. "We continue to make progress on our strategic plan to reinvent Staples," Chairman and CEO Ron Sargent said in a statement. "We drove online sales growth and aggressively managed expenses during the second quarter, but this progress was offset by weakness in our retail stores and international businesses." Of course, with the stock now off about 16% from its 52-week highs and trading at a still-cheapish forward P/E around 10, those headwinds might finally be discounted into the price.

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.



Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2604734, ~/Articles/ArticleHandler.aspx, 7/31/2014 6:35:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement