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: Same-store sales at Office Depot
So what: Wait. No, that's bad news, isn't it? Well, sort of. But OD reassured investors that if it sold less stuff in the quarter, at least it sold less low-margin stuff. By shifting PC sales toward the higher end, for example, OD was able to help boost gross margins one whole percentage point. Combined with strong back-to-school sales, the company says overall gross margins rose 150 basis points through August.
Now what: Improvements like these have Office Depot promising investors a small but noticeable improvement in operating profit for the current fiscal year. Still, the improvement doesn't look likely to translate into net profits just yet. Analysts are still forecasting a $0.02-per-share net loss at OD for this year. Right now, hopes center on the chance OD can earn $0.13 in 2012.
Call me a pessimist, though, but that still has me seeing Office Depot as a 20 forward P/E stock that's only expected to grow at 10% per year over the next five years. A "strong sell," in other words.
Disagree? Think there's still a future for Office Depot? Add it to your Watchlist and find out.
