Staples Plunges Most Since 2011 on Profit Forecast Cut
Staples Inc. (SPLS), the world’s largest office-supplies chain, slumped the most in more than two years after cutting its annual profit forecast because of declines in its retail and international business.
The shares slid 15 percent to $14.27 at the close in New York for the largest drop since May 18, 2011. Staples has gained 25 percent this year, compared with a 15 percent increase for the Standard & Poor’s 500 Index.
Staples, which suffers from waning consumer demand for products such as ink and toner and computer accessories, cut its outlook after second-quarter results were weaker than it expected. Chief Executive Officer Ron Sargent said drops in international operations countered online growth and cost management. International sales fell 8 percent in the period ended Aug. 3, hurt by Europe and Australia.
The decreasing appetite for items such as ink is a trend that may continue as offices become more digital, Daniel Binder, an analyst for Jefferies & Co. in New York, wrote in a note to clients today.
Full-year earnings-per-share from continuing operations will be $1.21 to $1.25, the Framingham, Massachusetts-based company said in a statement today, trailing the $1.32 average of estimates compiled by Bloomberg. The company previously projected $1.30 to $1.35.
Revenue in the second quarter declined 2.2 percent to $5.3 billion, the fifth drop in six quarters. Sales will fall in the low-single digits for the year, the company said.
Sales have also been slowed by the weak quality of job growth in the U.S. that has skewed heavily toward part-time jobs that wouldn’t require as many office supplies, David Strasser, an analyst for Janney Montgomery Scott LLC in New York, wrote in a note to clients.
Strasser has a buy rating on Staples.
Staples’ stock gain this year has partly been caused by the expected benefit of the merger of Office Depot Inc. (ODP) and OfficeMax Inc. (OMX), Jefferies’s Binder said in the note. The combination of the second- and third-largest U.S. office-supply chains will be challenging and has the potential to lead to market share gains for Staples, Binder said. He has a hold rating on the shares.
Net income in the second quarter fell 15 percent to $102.5 million, or 16 cents a share, from $120.4 million, or 18 cents, a year earlier, Staples said. Analysts projected 18 cents, on average.
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