Summary
- Staples has been struggling for some time. Things are getting worse rather than better.
- Can’t expect anything good from potentially very bad management. The company needs an activist investor.
- Wall Street estimate of 97 cents is optimistic. Expected EPS will come down over the next six months.
- Probable value trap for the time being until operations settle.
As a value investor who is not new to controversial stories (e.g. HGG, GME, HPQ, DELL, XRX, BBY, etc.) I have established a position not once but twice in Staples. In 2012-13, I did well buying low and selling into the Office Depot / Office Max Merger (NASDAQ:ODP) push up. This time around I don’t think I’ll be as lucky, and through this article I highlight how Staples (NASDAQ:SPLS) is potentially a value trap. As a result of this analysis I have reduced my position for a second time this year, and is currently a very small component of my portfolio.
Staples reported earnings on August 20th and disappointed yet again. Headlines showed a revenue beat at -1.8% (the lowest in over 12 quarters), and the stock went up pre-market. Early excitement, as the market proceeded to sell off on the 20th and 21st. As a holder, I agree with the market’s conclusion.
To read the entire article go to: Staples: Is a Meltdown Coming?
