Suggestion by Irakrakow on 2008-01-08 17:50:05
Excellent analysis of Staples business model and of the competitive pressure SPLS experiences, both from direct competitors Office Depot (ODP) and OfficeMax (OMX), but also indirect competitors such as WalMart (WMT), Costco (COST), and Best Buy (BBY). International competition will also heat up. Here are some ideas for analyzing how Staples will perform in 2008.
In their Q3 2007 conference call, CFO John Mahoney said that the economy is in recession. The slowdown has most seriously affected consumer oriented sales, particularly furniture. Management is looking for "low double digit" total company sales growth, a flat to slightly negative comp and high single-digit sales growth in retail, mid-teens growth in North American Delivery business; and high single-digit sales growth in local currency in international. You are absolutely right in your analysis that Staples is not only larger, but a better run and more flexible business than ODP or OMX. Office Depot, in particular, has had its share price fall off a cliff, from 40 early in 2007 to about 12 now. If Staples can achieve its growth goals in the face of the challenging consumer and business credit environment, it will be a great accomplishment. Their deal to sell Dell computer supplies should pay off. The remodeling of the stores will also work well. Staples product and customer mix is working well. However, Staples is ultimately dependent on the overall performance of the economy and cannot grow much more than it.
http://www.thestreet.com/s/its-more-than-the-economy-burning-office-depot/newsanalysis/retail/10394236.html http://www.thestreet.com/s/dells-best-buy-move-misses-holiday-cheer/newsanalysis/energy-and-technology/10393277.html http://seekingalpha.com/article/45945-staples-accelerating-growth-in-a-decelerating-market http://seekingalpha.com/article/55469-staples-q3-2007-earnings-call-transcript http://seekingalpha.com/article/55730-staples-says-there-s-little-credit-compares-recessions
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