Contrary to the company's advertising slogan goes, that wasn’t easy.
With back-to-school shoppers stocking up on those odds and sods they’ll need – and their parents likely doing the same for the home office – Staples Inc. (Nasdaq: SPLS) tried this week to shake off a quarterly profit picture dimmer than expected.
The office supply store chain compiled total company sales for the second quarter of 2012 of $5.5 billion U.S, a decrease of 6% in U.S. dollars and 3% on a local currency basis compared to the second quarter of 2011. Diluted earnings per share, on a Generally Accepted Accounting Principles (GAAP) basis, decreased 28% to $0.18 from $0.25 U.S. achieved in the second quarter of 2011.
Staples CEO Ron Sargent declared, "our second-quarter results fell short of our expectations due to softer than expected sales trends in North America and ongoing weakness in Europe and Australia."
Sargent added, "we continue to build momentum in categories beyond office supplies, but these improvements were more than offset by weakness in computers and core office supplies during the second quarter."
Even so, SPLS has its champions. Said Anthony Chukumba of BB&T Capital Markets, "Staples is by far the safest way to play the office supply retailers," adding he liked the company's management and clout with suppliers."
Another observer, Gary Balter of Credit Suisse, weighed in with "Staples is treated and valued with retailers in the 'may not be here in three years camp’ We view that as ridiculous."
The "contract business serves corporations and provides a value add not found elsewhere and retail stores serve small businesses and individuals with a wide range of products and services that go beyond paper," Balter said.
However, Staples sees no reason to hit that symbolic red panic button displayed in much of its TV advertising; the company is raising its sights a bit, adopting a slightly more optimistic sales and earnings outlook.
For the full year, Staples now sees net earnings of $1.42 to $1.48 U.S. a share. In May, the company had cut its forecast to a range of $1.35 to $1.45 U.S. a share.
"We’re taking a hard look at each of our businesses, and we plan to make significant changes to improve results," Sargent said. "We’re also building a plan to reallocate resources, take advantage of our best growth opportunities, and drive increased cost savings."
Even so, Staples, Office Depot and smaller rival OfficeMax face a tough selling environment as budget-conscious shoppers now buy school supplies at mass merchants, dollar stores, drug stores and pretty much anywhere they can find decent bargains.
Staples shares registered around $11.40 U.S. shortly before the close of business on Friday, bouncing off a new 52-week low of $10.99 U.S. only hours before. The stock peaked around $16.93 U.S. a share last March.
