Nomura Securities on Office Product Super Stores: Q4 Becoming “Achilles’ Heel”

Nomura Securities on Office Product Super Stores: Q4 becoming “Achilles’ Heel”

Analyst, Aram Rubinson, said, "In the coming week, Staples (Nasdaq: SPLS) will report Q3 EPS (Nov 15) and OfficeMax (NYSE: OMX) will host an Analyst Day (Nov 16). Challenges to the industry are likely to remain, if not intensify...In the past two weeks, OfficeMax reported that its Chief Merchant, Ryan Vero, was leaving the company. It also announced that its head of Contract is departing after only 10 weeks on the job...Ryan Vero was a good merchant in an earlier day, but the office superstores have simply missed too many trends. They missed mobile phones; they missed online copy/print; they missed Keurig; they missed Apple (Nasdaq: AAPL)."

"We expect Staples to report uninspiring results. We are 4% below consensus for Q3 ($0.45 vs. $0.47), 20% below consensus for Q4 ($0.34 vs. $0.43) and 17% below consensus for CY2012 ($1.28 vs. $1.54)."

"Q4 is an even bigger challenge to the sector. Early in the year, the channel is highly relevant (Back to Business). It is still relevant in Q3 (Back to School). Q4, however, is emerging as the sector’s “Achilles’ Heel”...We remain very cautious on the office superstore channel. The sector faces challenges in both Retail and Contract. Change is happening at a far too moderate pace, in our view."

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