Office-products retailer Staples Incorporated (SPLS) posted on Tuesday a drop in fourth-quarter earnings of 18%, citing continued weakness in corporate spending. Staples said weak spending in the business sector is most likely to continue.
Business customers “remained cautious with discretionary purchases,” Ron Sargent, chief executive officer, commented during a conference call following the earnings report release. Sales of computers, copiers and furniture were disappointing, signaling a strong rebound in the U.S. economy is not likely.
Staples—the top selling office-products retailer—now says that earnings for the year will fall short of analysts’ estimates. The company’s bleak outlook for 2010 comes amid hefty capital spending totaling $450 million for expansion plans during the year, including new store openings, remodeling, systems and upgrades to its distribution networks in North America and Europe.
Staples fought the severe economic decline by promoting lower-cost merchandise, rolling out more higher-margin basic supplies lines, and offering promotional discounts on high-ticket items.
Having survived this far in the downturn, the company’s smaller rival have not weathered the storm. The segment now faces stiff competition from discount retailers who have attracted price-sensitive shoppers seeking discounts against which Staples cannot effectively compete.
Projected full-year earnings are now projected to reach between $1.23 and $1.33 per share, compared with Wall Street’s mean estimate of $1.40.
Staples expects current quarter results to include earnings per share of between 25 and 27 cents, falling slightly below the 27 cents forecast by analysts polled by Thomson Reuters. The company expects sales to increase by a mid-single-digit percentage rate, quarter-over-quarter, and a low-single-digit percentage rate rise for the year. Wall Street expects a 3% increase for both the quarter and the year.
Evidence of losing business to competitors may be showing through in the fourth-quarter report. The numbers “look light given that this quarter includes the ‘back to business’ selling month of January, and peers saw more notable sequential improvements in the contract/delivery business through December,” said Stephen Chick, analyst at FBR Capital Markets.
Overseas sales dropped 6.3% quarter-over-quarter, falling in line with both Office Depot’s and Office Max’s 6% decline for the same quarter, “so at best they are even with the market there,” Chick said.
Staples reported for the fourth-quarter ending Jan. 30 a profit of $233.9 million, or 32 cents per share, compare with $286 million, or 40 cents per share, for the equivalent period last year. Excluding $42 million to settle several wage class-action lawsuits as well as restructuring expenses related to Corporate Express, earnings per share increased to 38 cents on revenue of $6.41 billion.
- Need fast service and cheap rates from a broker? Buy stock online at my favorite brokerage
- See today’s top stock picks and market analysis
- Want more? Check out the message board buzz for these stocks
- See what newsletters are recommending these stock picks
- Get breaking news alerts on these stocks: http://thestockmarketwatch.com/
- This newsletter has been helping traders make a killing on these stocks. Click here for a 25% discount offer.
About BeaconEquity.com
BeaconEquity.com is committed to producing the highest-quality insight and analysis of small-cap stocks, emerging technology stocks, hot penny stocks and helping investors make informed decisions. Our focus is primarily OTC stocks in the stock market today, which have traditionally been shunned by Wall Street. We have particular expertise with renewable energy stocks, biotech stocks, oil stocks, green energy stocks and internet stocks. There are many hot penny stock opportunities present in the OTC market everyday and we seek to exploit these hot stock gains for our members before the average daytrader is aware of them.
Beacon Equity Group Disclaimer
This newsletter is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. Beaconequity.com is a wholly-owned subsidiary of BlueWave Advisors.
While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.
