Earnings Preview: Staples

Staples (SPLS) is expected to report Q2 earnings before market open Wednesday, Sept. 3, with a conference call scheduled for 8:00 am ET.

Guidance

Analysts are looking for a profit of 21c on revenue of $4.69B. The consensus range is 21c to 24c for EPS, and revenue of $4.4B to $5.15B, according to First Call.

Analyst Views

Staples said on August 19 that its Q2 EPS dropped around 15%, while its revenue increased about 3% year-over-year. The retailer previously forecast that its Q2 EPS would be flat year-over-year. The company's preliminary results did not factor in numbers from Corporate Express, which was recently acquired by Staples. The lower forecast came as a result of the difficult U.S. macro environment, and weakness in its retail and contact businesses; CEO Ron Sargent said slower results are coming in some of the areas hit hard by the mortgage crisis.

On the Q2 warning, a Citigroup analyst believes the stock has "reached its floor," which makes it an attractive entry point. The firm thinks Staples is the best way to play an eventual macro economic recovery as the stock typically bottoms four quarters before GDP bottoms. FTN Midwest analyst Anthony Chukumba, who recommends buying Staples shares, said that the Q2 earning is "not entirely surprising," adding that if consumers and small and large businesses are cutting back on spending, "there's no much Staples can do to stimulate demand." Chukumba believes the Corporate Express acquisition will add to earnings this year, slightly. Credit Suisse's Gary Balter believes Staples will do well in the mid-term, due to cost savings from the Corporate Express acquisition, which should insulate growth.