Why Staples Shares Slumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of office supply retailer Staples sank 13% today after its quarterly results and outlook missed Wall Street expectations.

So what: The stock has soared over the past year on continued market share gains in the U.S., but today's second-quarter results -- income fell 15% on a revenue slip of 2% -- coupled with downbeat full-year guidance reignites concerns over its struggles abroad. In fact, international sales in the quarter fell 8.3% over the year-ago period, suggesting that its business model is a bit more sensitive to global weakness than analysts had thought.

Management now sees full-year operating EPS of $1.21 to $1.25 and a revenue decline in the low single digits, well below its prior view of $1.30 to $1.35 in earnings and a revenue increase in the low single digits. "We continue to make progress on our strategic plan to reinvent Staples," Chairman and CEO Ron Sargent said in a statement. "We drove online sales growth and aggressively managed expenses during the second quarter, but this progress was offset by weakness in our retail stores and international businesses." Of course, with the stock now off about 16% from its 52-week highs and trading at a still-cheapish forward P/E around 10, those headwinds might finally be discounted into the price.

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The article Why Staples Shares Slumped originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool owns shares of Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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