Tags: Staples | investors | economy | SPLS

Staples Investors Wait For Stronger Economy

By    |   Tuesday, 20 Dec 2011 09:24 AM

Office products company Staples (SPLS) is bested as an online sales company only by Amazon.com (AMZN). However, the Staples customer base of businesses is more sensitive to economic conditions. As a result, the company and its investors currently wait for a stronger economy to emerge.

Staples divides its organization in to three business segments: North American Retail, North American Delivery, and International. The two North American segments each generate about 40 percent of revenues and International produces the remaining 20 percent. The company operates about 1,900 stores in North America with plans to add 20 net new stores in 2011.

For the first nine months of 2011, revenues for Staples were relatively flat at $18.56 billion, up from $18.13 billion in 2010. Net income for the period was 99 cents per share, up from 83 cents a year earlier.

For the full year, the consensus earnings estimate is $1.37 per share, compared to $1.27 earned in 2010. The earnings estimate for 2012 is $1.50 per share.

Flat sales results

In the 2011 third quarter, Staples report revenues from North American Retail were flat year-over-year, North American Delivery sales increased by 2 percent and International sales declined by 2 percent.

The 14 percent gain in net income was due to improved profit margin. Management's outlook in the earnings report was a similar pattern of flat to slow growth in sales for the remainder of the year.

In this slow-growth environment, Staples management has been aggressive in returning a majority of free cash flow back to shareholders in the form of dividends and share repurchase programs. Of the $850 million of free cash flow generated in the first three quarters of 2011, $490 million had been spent on share buybacks and $210 million on regular cash dividends.

Recently, analyst Michael Souers at Standard & Poor's reiterated his buy rating on the stock, noting strong free cash flow and cost saving from a recent acquisition should boost results over the next several years. His target price is one-third higher than the current market price for SPLS.

The company next reports on Feb. 15.

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Office products company Staples (SPLS) is bested as an online sales company only by Amazon.com (AMZN). However, the Staples customer base of businesses is more sensitive to economic conditions. As a result, the company and its investors currently wait for a stronger economy...
Staples,investors,economy,SPLS
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2011-24-20
Tuesday, 20 Dec 2011 09:24 AM
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