Why Staples, Inc. Shares Slumped Today

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 Staples  (NASDAQ: SPLS  ) plunged 16% today after the office supply retailer posted disappointing quarterly results and announced a plan to close 225 stores.

So what: The stock has slumped in recent months on concerns over weakening fundamentals, and today's Q4 results -- earnings per share plunged 28% on a top-line decline of 11% -- coupled with the massive store shutdown only reinforce those worries. In fact, Staples' same-store sales during the quarter declined 7% while operating margin contracted 355 basis points, suggesting the company continues to be pressured by intensifying online and discount store competition.

Now what: Management also announced a multiyear cost savings plan, which is expected to generate annual cost savings of about $500 million by the end of 2015. "A year ago, we announced a plan to fundamentally reinvent our company," said Chairman and CEO Ron Sargent. "With nearly half of our sales generated online today, we[']re meeting the changing needs of business customers and taking aggressive action to reduce costs and improve efficiency." More important, with the stock hitting a new 52-week low today and off about 30% over the past three months alone, now might be an opportune time to buy into that turnaround talk. 

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  • Report this Comment On March 06, 2014, at 5:25 PM, Maybear wrote:

    I really wish The Motley Fool Group would wake-up and realize 90% of us do not have the 30-45 minutes to set through an email pitch.

    I would greatly appreciate telling me "The next industry to crumble... and why NOBODY sees it coming" in 3-minutes or less. After that if I am not peaked to purchase your newsletter or need more information - I'll go to your web site.

    But really in today's business climate the theatrics are wearing very thin. Is your business dropping off that much?

    Please consider and respect our time, maybe then I'll find the $95.00 from my meager disability income to support your company.

    Enough is enough ....

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