Staples US Mobile e-Retail and Cash Growth
Staples (NASDAQ: SPLS) is focused on multichannel, multidevice, customer convenience in US mobile to expand its e-commerce offerings and has great cash growth potential. Staples has a good history of returning cash to shareholders. The retailer released Windows Store app for Staples.com last month, which also works in conjunction with Staples other ecommerce properties and lets customers view or add items to their cart on the Windows Store app, the Staples smartphone app, the company’s mobile site, the tablet site or Staples.com. Due to subpar growth, the economy is expected to grow modestly in 2013. By 2014, worldwide mobile commerce will reach $352.7 billion. Staples is investing $250 million towards the development and integration of its online and mobile presence. Consumers have largely kept up spending levels this year. Forrester says U.S. web shoppers will spend $262 billion in 2013. Staples has $1 billion-plus in annual free cash flow. The $25 billion (revenue) company is using that stash for dividends and stock buybacks (nearly $1 billion planned), and to pay down debt on its $2.65 billion purchase of Corporate Express. Sales rose 3% to $6.57 billion. Gross margin narrowed to 26.2% from 27% as input costs climbed. Operating expenses jumped 12%, driven by $176.6 million in integration and restructuring costs. Staples has ranged in price between $13.05-$13.28 after having opened the day at $13.07 as compared to the previous trading day's close of $13.07. The stock trades at 4.3 times earnings before interest, taxes, depreciation, and amortization (Ebitda) and a forward price/earnings ratio of 9.1, vs. 13.3 for the S&P 500.
Key Stock Data
Dividend Yield 3.49%
P/E Ratio N/A
Market Cap $9.24 Billion
Shares Outstanding 668.35 Million
Public Float 662.18 Million
The stock closed 0.52% higher at $13.43 on volume of 6.70 million after touching an intra-day high of $13.64 April 9. Staples' shares have gained more than 2.50% in the last two sessions. The gains have pushed the stock above its 50-day moving average, which is a bullish signal. The positive trend is further confirmed by the stock's MACD chart. Year-to-date, the company's shares have gained nearly 19%, outperforming the S&P 500. The stock is currently trading 13.44% below its 52-week high. Full-year web sales increased 5% year over year to $10.605 billion from $10.100 billion in 2011. Excluding an extra week included in the 2012 earnings calendar, Staples says web sales were up 3% in 2012, putting total web sales at $10.4 billion. Staples seeks to save annual expenses of $250 million by the end of 2015. Staples has a market cap of $8.74 billion.
The Windows Store app for Staples.com provides customers with access to Staples Rewards and features tools that make it easier for small businesses to research and shop for everything they need for their business or home office. The Staples Windows Store app also works in conjunction with Staples other e-commerce properties, allowing customers to view or add items to their cart on the Windows Store app, the Staples smartphone app, the mobile website, the tablet site or Staples.com, making it easy for them to shop whenever and however it’s convenient for them. The Staples Windows Store app supports both touch and more traditional input methods, making the app available to users on all the different form factors that run Windows 8. The app is available for free download in the Windows Store and will serve tablets, laptops and desktop PCs.
Staples is already strong online. Staples has 100,000 products available in its warehouses or from suppliers that ship directly to customers. Staples retail and online strategy aims to increase investment in its online businesses, reorganize its operations, implement leadership changes, initiate a multi-year cost savings plan, and restructure its International Operations. “Staples is investing to provide a superior multi-channel shopping experience through the use of our websites, mobile assets and stores,” said Brian Tilzer, Staples SVP, global e-commerce.
Staples focuses on saving time for small business owners. The retailer allows new customers to make purchases using a guest checkout option, but does offer registration options during the transaction. It also speeds up the process by pre-populating the billing address and has a progress bar so customers know how many more screens they have to complete. Current trends of stronger consumer spending and business investment suggest the possibility of increasing momentum later in the year. But continued budget uncertainties and the prospect of less government spending under the budget sequester now in place could hold GDP growth for the year as low as 1.75%.
“Staples customers are very excited about the new computers and tablets featuring Windows 8, and we’re enhancing the Staples.com experience for Windows 8 users,” saidSteve Bussberg, senior vice president of Staples.com. “Staples makes things easier for small businesses by using the latest technology, and the Staples Windows Store app enables customers to shop Staples even faster.”
Staples plans to triple the size of its e-commerce and IT staff by 2014. The Internet is a critical element of economic progress, pushing a significant portion of economic growth. Among 4,800 small and midsize enterprises surveyed, it created 2.6 of them for each lost to technology-related efficiencies. The labor market in the U.S. has improved significantly since late last year.
“Our vision is to establish Staples as the single-source product authority for millions of businesses,” said Ron Sargent, Staples’ chairman and chief executive officer. “We are building on the strengths that are the foundation of our success by focusing on five key priorities: accelerate growth in our online businesses; fully integrate retail and online; improve retail store productivity; restructure our International Operations; and return cash to stakeholders.”
Mobile is constantly evolving. It’s all about strategy and trends throughout the year in order for retailers to achieve success in online and mobile sales. The best retail Internet and mobile sites display innovation, creativity, and technology. The number of US shoppers planning on using these websites will keep growing, which means retailers should fully optimize these sites, making sure consumers receive the best shopping experience.
Return Cash To Stakeholders
Staples remains fully committed to returning excess cash to stakeholders and is focused on maintaining its current investment grade credit rating. Staples plans to continue to repurchase its common stock through open-market purchases, which are expected to total approximately $450 million during fiscal year 2012, and also plans to repay its outstanding $325 million Senior Notes due October 2012 with cash on hand. As a result of these activities, as well as its ongoing cash dividend program, Staples plans to return more than $1 billion of cash to stakeholders during fiscal year 2012. “We are focusing on our biggest opportunities, aligning our organization to address the needs of our customers, and reducing exposure to our weakest businesses,” Sargent said. “This puts us in a much stronger position to drive long-term sales and earnings growth.”
2013 Investment Outlook
For investors, Staples is a leader, growing in mobile capabilities as was one of the first retailers to offer a dedicated tablet site. Staples also offers shoppers the convenience of an award-winning smartphone app and mobile site. In the age of mobile e-Retail, online has become even more crucial for retailers to reach the multichannel and multi-device consumer. The Internet is also a catalyst for generating jobs. The improvement in the labor market is expected to benefit office products suppliers such as Staples Inc. The retailer has good overall business valuation. Staples also raised its quarterly dividend by a penny to 12 cents a share this year. Staples shares have sagged 45% over the past three years which is attractive for new investors. The $1 billion-plus cash also makes Staples an attractive buyout target for private equity firms. Overall valuation makes sense for Staples to be a good investment over time.
Staples, Inc. is the world’s largest office products company and second largest internet retailer.
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