Deutsche Bank Comments on Staples (SPLS) Q1 Miss

Deutsche Bank maintained a Hold rating on Staples, Inc. (NASDAQ: SPLS) with a price target of $11. Analyst Mike Baker discussed Q1 results.

"Sales of $5.65b was a bit better than expected versus consensus of $5.62b, primarily due to better commercial sales, offsetting weaker “stores and online.” Comps were down 4% versus consensus down 2.5% and DB down 3%, but this was better than the 7% decline last quarter. But gross margin fell 90 bps, worse than consensus of down 40 and DB down 50. Expenses were better, helped by cost cutting, and were up only 80 bps relative to sales, 20 bps better than we modeled," said Baker.

"As they did last quarter, SPLS gave guidance for the coming quarter, and it was below consensus. The company is looking for 2Q EPS of 9c-14c versus consensus of 15c. DB is at 13c. For the full year, SPLS maintained its free cash flow outlook of $600mm, but included an expected restructuring impact to cash flow of $60mm-$100mm. In our model, we had $600mm in free cash flow, but estimated $220mm in restructuring impact. The lower guided impact suggests lower non-gaap net income than we had modeled by about $140mm at the midpoint. This lowers our non-gaap EPS by about $0.15, suggesting an expectation by the company of around $0.85-$0.90. This is below consensus of $1.08, so we expect numbers could come down," he added. "We think the company is talking the right steps, including aggressively closing stores this year, 80 of which will close next quarter. We maintain our Hold rating as they work through their improvement initiatives."

For an analyst ratings summary and ratings history on Staples, Inc. click here. For more ratings news on Staples, Inc. click here.

Shares of Staples, Inc. closed at $13.39 yesterday.

You May Also Be Interested In

• Freedom Broker Downgrades Gentherm Incorporated (THRM) to Hold
• RTX Corp. (RTX) PT Raised to $215 at UBS, Neutral Rating Maintained Given Premium Valuation
• Summit Therapeutics plc (SMMT) PT Lowered to $38 at Stifel, But 'Fundamental Conviction Intact'