Will Staples Break Back Under $20.00??? (SPLS, OMX)

Posted in General 
August 19th, 2008

Staples Inc. (NASDAQ: SPLS)  is being pounded into the open.  Shares just opened and are down by about 9% at $22.28 in very active trading.  We have seen over 700,000 shares trade hands.

The business and consumer slowing is affecting its sales.  The office supplies retailer sees 2008 sales growth in low-single digits and now sees flat earnings growth before a large charge related to its acquisition of Corporate Express. For Q2 it actually sees a drop of 15% to earnings on a 3% sales rise.

What is interesting here is that the stock is nowhere close to its 52-week lows as the 52-week trading range is $19.69 to $26.57.  For most of the last four years this has traded in a band of $20.00 to $25.00, making it officially a dead-money stock.  About five years ago this was a $15.00 stock.  Shares were just at $25.00 in June.  With such a short memory and with an overseas acquisition integration, some traders have to be wondering if this heads back under $20.00.

OfficeMax Inc. (NYSE: OMX) fell more than 66% from its highs over the last year, so another 10% or more wouldn’t do anything fundamentally un-nerving to destroy Staples.  Stay tuned.

August 19, 2008

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