Framingham, Mass.-based Staples (NASDAQ:SPLS) shares were down 13.5% in early Wednesday trading after it reported fiscal Q2 financial results that fell short of estimates for both revenues and earnings.
Sales in the quarter dropped 2% year over year to $5.3 billion, hurt by more than 100 store closures across North America and Europe over the past year. Analysts had expected sales to be closer to $5.37 billion.
Earnings from continuing operations, while up strongly in comparison to last year at $0.16 per share, fell short of the estimated $0.18, with Staples blaming "lower product margins, the negative impact of fixed expenses on lower sales, and investments related to the company's strategic initiatives" for holding back profits. Operating profit margins fell 65 basis points.
The company experienced softer sales of business machines and technology accessories, ink and toner, and computers. This was somewhat offset by better sales of tablets, facilities and break-room supplies, and copy and print services.
One bright spot among Staples' results was free cash flow. Cash profits year-to-date have now reached $224 million, a 71% increase over the company's free cash flow in the first half of 2012. Staples predicts it will generate more than $900 million in free cash flow this year.
Staples is nonetheless reducing its outlook for the rest of the year. Sales are now expected to decline in comparison to 2012, in the low single digits. Full-year earnings from continuing operations should range from $1.21 to $1.25 per share.
-- Material from The Associated Press was used in this report.