Thumbs up for Staples



3 October 2006 — New York (NY): With just a week to go to Staples investor conference on 10 October, Citigroup analyst Bill Sims is giving the OP giant the thumbs up, strongly recommending that investors buy Staples stock ahead of the event. The company’s positive future outlook can in part be attributed to its competent management team, says Citigroup.


According to Sims, the conference will convince investors that Staples is a long-term sustainable growth story with much greater sales and profit opportunities than anyone could have imagined. Better even, the praise applies to all three segments of its business.


Sims says: "The company’s North American Retail business is expected to see a sustainable sales and margin boost from copy and print success, own-brand merchandising, increased foreign sourcing and back-to-school sales."


North American Delivery, meanwhile, the company’s highest operating margin business, is expected to sustain mid-teen sales growth for the next three to four years driven by new customer acquisitions and share-of-wallet improvements.


The trailing division in the Staples stable, its European business, also appears to be on track and making progress. Sims expects the company to achieve 400 basis points of operating margin expansion within three to four years. Staples is also likely to report improvements in its UK retail and French catalogue business.


Citigroup has set a $31 price target, which implies an expected total return of 28 percent. This will likely prove a conservative prediction as the market revises its long-term growth outlook on the US retail and delivery giant.