Jefferies Wonders If Staples Interim CEO Wants The Job On A Permanent Basis

Jefferies said it appears that interim CEO Shira Goodman appears to want the CEO job of Staples, Inc. SPLS on a permanent basis as she laid out a compelling vision for Staples, one that will narrow its geographic focus and diversify away from core office products.

Goodman also highlighted the shift from a retail culture to a delivery culture and a pricing strategy that is evolving from high/low to more everyday value. Further, she hinted at M&A to accelerate diversification of products and services. But, looking at the share price drop, investors seem to dislike the idea.

"Shares were weaker than we expected, but may have reflected concerns about M&A plans. Given lacklustre results, investors may not like the idea of acquisitions, but our sense is this mgmt. will only do highly accretive tuck-ins or deals focused on diversifying away from core office, which is in decline," analyst Daniel Binder wrote in a note.

Meanwhile, Staples' quarterly EPS of $0.12 came in-line with the Street as strong contract division profitability offset weakness in retail. However, retail traffic remains challenging, leading to the 4 percent comp store sales decline.

Binder has a Hold rating on SPLS stock with a price target of $9.

At time of writing, shares of Staples fell 2.94 percent to $8.41.