OMX Officemax Incorporated

Staples Inc. (SPLS), the global leader in the supply of office products, in its attempt to optimize its shareholders’ return, recently announced a new share repurchase program.

The newly announced program, which can be terminated any time, has no set expiry date and authorizes the company to buy back up to $1.5 billion shares of its common stock through open market or private transactions.

The company also notified that the new program overrides the previous $1.5 billion program announced in June 2007. The company had $295 million remaining under its earlier buyback program as of July 30, 2011.   

In addition, the company also declared a quarterly cash dividend of 10 cents per share. The announced dividend will be paid on October 13, 2011 to stockholders of record as of September 23, 2011.

Being a leading retailer of office products and services, Staples is better positioned than its competitors to sustain its growth based on margin expansion, effective merchandising, and growth prospects across its retail, delivery and international divisions.

Staples is making prudent investments in the highly fragmented North American retail market to expand its business technology, and copy and print services that generate higher profit margins, while also boosting its core supplies categories like ink and toner. The company is also focusing on controlling expenses.

Staples faces stiff competition from office supply retailers, such as OfficeMax Inc. (OMX) and Office Depot Inc. (ODP) and warehouse clubs, discount stores, mass merchandisers, computer and electronics superstores on attributes, such as store format, pricing strategy and in-stock consistency. This may weigh upon the company’s results.

Moreover, we remain cautious about the macroeconomic environment and sluggish job market. The decline in business and consumer spending, and weak credit markets have slowed the demand for big-ticket items, such as business machines and other durable products. We observe that the demand for office products is closely tied to the health of the economy.

Staples has a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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