Staples (SPLS) is struggling on the heels of a merger between smaller competitors Office Depot (ODP) and Office Max (OMX). In fact, shares of SPLS stock sank in early trading this morning after Staples earnings were released.
Staples earnings came to 42 cents per share of SPLS stock. That was in-line with analyst estimates after two quarters of earnings misses.
But that was a nearly 9% drop from Q3 of 2012. Plus, sales fell 4% from the previous quarter and missed the consensus estimate from SPLS stock analysts.
Trouble for SPLS Stock?
The biggest problem for Staples stock investors is that there’s simply less demand for office supplies. That’s because workplaces are becoming more mobile and consumers are moving toward buying just about everything online.
Staples is trying to hop on the e-commerce train, but SPLS stock is feeling the squeeze this morning with a 2% drop after the open.
“We continue to face weak demand for core office supplies, but we’re driving growth online and in new categories, while aggressively managing expenses,” said Ron Sargent, Staples CEO.
The strategy is paying off for SPLS, which had 50% more inventory online and online sales up 3% in the most recent quarter. The company also met its $150 million cost-cutting goals ahead of schedule.
But that wasn’t enough for SPLS stock investors.
Staples has also experimented with new strategies to get online customers in stores — like installing Amazon (AMZN) pickup lockers in stores in 2012. But the company uninstalled them this month after realizing that customers weren’t sticking around to buy Staples products as hoped.
That kind of vigilant monitoring is a good thing for SPLS stock, but it does raise the question of what will work.
For now, the in-line earnings report is a good sign. But as the drop in SPLS stock indicates, it may not be enough to convince investors that the company can thrive among the competition from AMZN, Target (TGT), drugstores and the newly-merged Office Depot.
The company reiterated its fiscal year outlook from August, projecting Staples earnings in the range of $1.21-$1.25 per share of SPLS stock for the year, and a continued declines in sales.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
