Office Depot Downgraded to Underperform - Analyst Blog
May 14 2013 - 1:31PM
Zacks
On May 13, we downgraded our recommendation to Underperform on
Office Depot, Inc. (ODP), the supplier of a wide
range of office products and services, based on the company’s
dismal first-quarter 2013 results and disappointing outlook.
Why the Downgrade?
Estimates for Office Depot have been portraying a downward trend
ever since it posted first-quarter results on Apr 30. The company
delivered breakeven bottom-line results for the quarter that fell
short of the Zacks Consensus Estimate of 5 cents and went down
significantly from the year-ago earnings of 11 cents. Soft top-line
performance muted the company’s cost containment efforts.
Total revenue of $2,718.3 million decreased 5.4% from the
prior-year quarter and was below the Zacks Consensus Estimate of
$2,783 million.
Management now forecasts a sales decline of 3% to 4%, during the
second quarter of 2013, attributable to mid-single digit fall in
sales across the North American Retail and International segments,
partially offset by improved sales performance at North American
Business Solutions.
Following the release, the Zacks Consensus Estimate for 2013 and
2014 has gone down 66.7% and 45.5% to 2 cents and 6 cents,
respectively. Recently, this Zacks Rank #3 (Hold) company decided
to merge with OfficeMax Inc. (OMX) to better
compete with the industry leaders. The decision augurs well for
both the companies, which have been struggling with soft sales.
Cause for Concern
Business budget remains tight, consumers remain more cautious
than ever and companies are trying hard to navigate through the
challenging economic environment. Consumers and small businesses
remain frugal about big-ticket spending on items such as business
machines and other durable products. We believe that the demand for
office products is closely tied to the health of the economy.
Stocks that Warrants a Look
While we prefer to avoid Office Depot until we see signs of
improvement in the company's performance, other stocks worth
considering in the non-food retail wholesale industry are
Big 5 Sporting Goods Corp. (BGFV) and
Cabela's Inc. (CAB), both the stocks hold a Zacks
Rank #1 (Strong Buy).
BIG 5 SPORTING (BGFV): Free Stock Analysis Report
CABELAS INC (CAB): Free Stock Analysis Report
OFFICE DEPOT (ODP): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
ODP (NASDAQ:ODP)
Historical Stock Chart
From Jun 2024 to Jul 2024
ODP (NASDAQ:ODP)
Historical Stock Chart
From Jul 2023 to Jul 2024