Please ensure Javascript is enabled for purposes of website accessibility

Staples Inc. Stock Jumps 12% as It Searches for Buyer

By Motley Fool Staff - Apr 12, 2017 at 7:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Still floundering after the failure of its merger with Office Depot, who is going to pony up for the retailer?

In this segment from the Motley Fool Money radio show, the team looks at the bullish trading behind office supply retailer Staples (SPLS), which announced it is looking for a buyer. Despite the company's struggles, it has successfully implemented some changes that could make it a tempting acquisition target. 

A full transcript follows the video.

This video was recorded on April 7, 2017.

Chris Hill: Shares of Staples up more than 10% this week after the company said it is looking into selling itself. Staples tried to merge with Office Depot last year, and that was shut down due to antitrust concerns. What do you think, Jason? You got $7 billion in your pocket, do you want to buy Staples?

Jason Moser: I think any retailer not named Amazon is probably pretty easy to make fun of these days. But actually, I could see some attraction here. It's not an easy task, mind you, but there are some signs, at least, that this is a pretty successful business that is growing into a 21st century retailer. If we look at the metrics that they've turned from 2011 to today, delivery has become a more substantial part of their business. They're relying less on people going to the store and relying more on getting that product to their customers. And that's playing on the bottom line, as delivery accounts for a full 75% of the company's operating profit. And it's the No. 5 e-commerce player in the space. I know that's a bit surprising, but they're the No. 5 e-commerce company, behind Amazon, Apple, Dell, and Wal-Mart. So, clearly, they're doing something right. On the flip side, there are challenges. The top line is shrinking. Margins are getting squeezed. But again, they are doing some good things and investing in the 21st century new retail space, and I could see how, perhaps, private equity might see some attraction here.

Hill: I think there are some people who agree with you, because earlier this week, you had Panera, that was in play before the JAB deal was announced, and then this news from Staples, and both those companies had roughly the same market cap. I just looked at them and thought, "Gosh, one is a restaurant that turned itself around quite nicely, Staples has been struggling. This seems like a no-brainer, if you have $7 to $8 billion, and you want to buy one of them." I put that out on Twitter and a bunch of people were like, "Put me in for Staples, because they have the office businesses kind of locked up."

Moser: They have a pretty good hold on it. Again, it's just a matter of taking that big physical footprint they already have and using it in a different way. Instead of getting people to come there, they're using it as a way to get product from point A to point B. And we know that, today, it's more about convenience, it's more about value. Customers now, it's more about how they value their time, versus saving, at the end of the day, with what you're paying at the store. It sounds like Staples is playing into that a little bit, and it's working, to an extent.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Staples, Inc. Stock Quote
Staples, Inc.
SPLS

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
321%
 
S&P 500 Returns
111%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.