UBS on U.S. Hardlines Retail: Looking at Office Supply Sales Trends

UBS on U.S. Hardlines Retail: Looking at Office Supply Sales Trends

Analyst, Michael Lasser, said, "We are expecting another mixed reporting season for the office supply retailers, which begs the question what will it take for this sector to improve? The last time all three companies generated a positive retail NA comp simultaneously was 3Q’06 suggesting OfficeDepot (NYSE: ODP), OfficeMax (NYSE: OMX), and Staples (Nasdaq: SPLS) are trading share of a declining sector (especially in light of the 3mm jobs created since the most recent economic trough). For the first quarter, we forecast a 1% comp at SPLS, 0% at OMX, and -5% at ODP (though leap year could help). On the NA contract side, we are looking for better results with a 1.0% to 1.5% increase for each company."

"We remain convinced that the industry needs to experience some capacity rationalization either through consolidation or more unilateral store closures. While it doesn’t appear the sector is any closer to seeing near-term M&A activity, our pricing survey work (figure 13) shows Amazon.com (Nasdaq: AMZN) offers a 20% discount on a basket of office supplies indicating consumers are unlikely to be harmed by fewer players."

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