Has Staples Lost Momentum? - Analyst Blog

It seems that investors are losing confidence in Staples, Inc. SPLS, after this office supplier retailer disappointed with its fourth-quarter fiscal 2013 performance. Shares of this Zacks Rank #5 (Strong Sell) company have dropped about 14.3% since the earnings announcement, whereas year-to-date the stock has fallen roughly 26.3%.

Estimates for Staples have shown a downtrend since the company posted the results. The softness in results triggered a downtrend in the Zacks Consensus Estimates, as analysts become less constructive on the stock's future performance.

This is evident from the movement witnessed in the Zacks Consensus Estimate that tumbled 16.8% to $1.09 for fiscal 2014 in the past 30 days. For fiscal 2015, the Zacks Consensus Estimate slipped 18.9% to $1.07 in the same period.

Staples, which competes with Office Depot, Inc. ODP, reported fourth-quarter earnings of 33 cents a share on Mar 6 that missed the Zacks Consensus Estimate of 39 cents and fell 28.3% year over year. Over the past few quarters, the company has been grappling with a dismal performance. The company had registered negative earnings surprises over the trailing four quarters with an average miss of 8.2%.

Total sales decreased 10.6% year over year to $5,873 million and fell short of the Zacks Consensus Estimate of $5,973 million. 

Lower sales due to store closures and stiff competition from online retailers such as Amazon.com Inc. AMZN weighed on Staples' performance. Fueling further concern, the company announced the closure of 225 outlets across North America by the end of 2015.

Given the near-term challenges, the company expects lower sales for the first quarter of fiscal 2014 as compared with the prior-year quarter. Staples expects earnings per share in the range of 17–22 cents.

Other Stocks to Consider

Not all retail stocks are performing as disappointingly as Staples. A better-ranked stock includes Barnes & Noble, Inc. BKS sporting a Zacks Rank #1 (Strong Buy).