Deutsche Bank Highlights Three Key Takeaways From Staples Report

In a report published Monday, Deutsche Bank analysts maintained a Hold rating on

, with a price target of $18. The analysts mentioned that profitability at Staples continues to decline, "although the pace of the declines is subsiding." In the report, Deutsche Bank noted, "The biggest takeaway from Staples' results is the increase in the company's synergy target should it close its ODP deal. Previously, SPLS had targeted more than $1b in gross synergies, but is now speaking to $1b in net synergies, including the likelihood of reinvestment in sharper pricing." "EBIT fell $51mm this quarter after adjustments, the 4th consecutive quarter of lower declines. Adding back about $60mm in increased incentive comp, EBIT would have been up for the first time since 4Q12. For the year, EBIT was down $283mm despite SPLS achieving $167mm in cost savings and ending the year at a $250mm run rate in cost reductions. This implies $450mm in lost EBIT," the analysts wrote. The third takeaway that the analysts mentioned was improving commercial sales growth and other signs of "relative health". "While Staples total sales fell 4%, excluding closed stores and FX, sales were up 1%. This includes a 5% increase in commercial sales…[Although] the commercial increase was offset by lower operating profit, which fell $22mm or 13%, equating to 140 bps."