Staples (SPLS) Ship Stays Afloat but Bailing Continues
Tweet Send to a Friend
Get Alerts SPLS Hot Sheet
Price: $14.75 +0.55%
Rating Summary:
3 Buy, 11 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 25 | New: 24
Rating Summary:
3 Buy, 11 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 25 | New: 24
Trade SPLS Now!
The office products space stabilized in the third quarter of 2012, and Staples (Nasdaq: SPLS), the last of the three players to report, saw progress in a number of areas, noted research by Goldman Sachs.
"Notably, retail ticket grew, retail profits increased, and delivery revenue increased as well," said Goldman analyst Matthew J. Fassler.
Goldman, it should be noted, has a Sell rating on Staples, and it is not difficult to figure out why. With major secular declines in paper demand and PCs, a side effect of blockbuster tablet sales, companies in the space are not exactly standing tall.
In the past 12 months, Staples shares declined by 20 percent. On a year-over-year basis, Office Depot (Nasdaq: ODP) and Office Max have performed much better, but few consider it a growth sector.
However, other analysts say Staples is closing the gap on its competitors.
"Staples increased the sales gap with competitors this quarter and we think this should continue as they focus on several top line drivers. These include more aggressive pricing for the staples.com business, adding more SKU’s on line, and a focus on service," said Deutsche Bank’s Mike Baker.
Of course, with more aggressive pricing comes lower margin.
"To offset the lower gross margins, Staples has articulated several cost cutting measures, planned to drive $250mm in savings. The most important of these we believe is a 15% reduction in domestic square footage," said Baker.
Competitors are also reducing square footage.
"Looking ahead, they've outlined a number of strategies to drive top line, but need cost savings to pay for them in order to generate higher EBIT dollars. The strategies seem plausible, but it's too soon to tell if SPLS can drive share and grow profits simultaneously, while dealing with weakness overseas," said the Deutsche Bank analyst.
Goldman Sachs has a Sell rating and $11.50 price target on Staples (up from $11). Deutsche Bank has a Hold rating and $11 target.
Shares of Staples are up 3.4 percent intra-day to $11.94.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
"Notably, retail ticket grew, retail profits increased, and delivery revenue increased as well," said Goldman analyst Matthew J. Fassler.
Goldman, it should be noted, has a Sell rating on Staples, and it is not difficult to figure out why. With major secular declines in paper demand and PCs, a side effect of blockbuster tablet sales, companies in the space are not exactly standing tall.
In the past 12 months, Staples shares declined by 20 percent. On a year-over-year basis, Office Depot (Nasdaq: ODP) and Office Max have performed much better, but few consider it a growth sector.
However, other analysts say Staples is closing the gap on its competitors.
"Staples increased the sales gap with competitors this quarter and we think this should continue as they focus on several top line drivers. These include more aggressive pricing for the staples.com business, adding more SKU’s on line, and a focus on service," said Deutsche Bank’s Mike Baker.
Of course, with more aggressive pricing comes lower margin.
"To offset the lower gross margins, Staples has articulated several cost cutting measures, planned to drive $250mm in savings. The most important of these we believe is a 15% reduction in domestic square footage," said Baker.
Competitors are also reducing square footage.
"Looking ahead, they've outlined a number of strategies to drive top line, but need cost savings to pay for them in order to generate higher EBIT dollars. The strategies seem plausible, but it's too soon to tell if SPLS can drive share and grow profits simultaneously, while dealing with weakness overseas," said the Deutsche Bank analyst.
Goldman Sachs has a Sell rating and $11.50 price target on Staples (up from $11). Deutsche Bank has a Hold rating and $11 target.
Shares of Staples are up 3.4 percent intra-day to $11.94.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
You May Also Be Interested In
- UPDATE: UBS Downgrades Carnival (CCL) to Neutral; Worst May Not Be Behind
- UPDATE: Wedbush Downgrades XenoPort (XNPT) to Neutral
- UPDATE: BTIG Starts ING U.S (VOYA) at Buy, Shares 'Significantly Undervalued'
Create E-mail Alert Related Categories
Analyst Comments, Analyst EPS View, Analyst PT ChangeRelated Entities
Deutsche Bank, Goldman Sachs
Login with Facebook
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
