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  • Staples: Industry Consolidation Leading To 50% Upside
       • Thu, Apr. 17 SPLS 45 Comments

    Summary

    • The poor quarter was negatively skewed by difficult comps against a 53rd week, unfavorable foreign exchange rates, and 109 store closures.
    • The market systematically underestimates the speed at which industry consolidation will take place between Office Depot and Office Max.
    • The street under appreciates Staples market leading position, as well as its growing e-commerce business.
    • Private equity is likely a potential suitor in a non-levered high free cash flow retailer with significant hidden value in its online business.
    • Business trades at around 10x LTM earnings, with significant free cash flow levers starting in 2015.