9 February 2007 — New York (NY): Citigroup expects Staples to have gained market share forfeited by Buhrmann on the back of Corporate Express North America’s disappointing Q4 results.
Citigroup analyst Bill Sims says the company expects Staples North American delivery sales to have grown by 20 percent during the quarter, compared to industry growth of 5 percent.
The retailer’s earnings are much more stable now than they have been in the past, says Citigroup, as the company has either met or exceeded consensus estimates over the past 12 quarters. Comparable store sales are understood to have stabilised well with low single-digit growth likely to continue for the foreseeable future.
Citigroup predicts that growth of the higher profit margin delivery and European businesses will drive stronger than anticipated EPS going forward, which in turn should drive stock performance.
Possible risks to the stock achieving Citigroup’s valuation have also been identified. A faster than anticipated turnaround at Office Depot, which resulted in the company securing a larger than expected piece of the OP market, would put the estimates at risk. And market share gain from non-specialty retailers, such as warehouse clubs and drugstores, who have been allocating more square footage to the OP category during peak selling seasons, could pose a greater than anticipated competitive threat.