Staples Inc. (SPLS:US), the world’s largest office-supplies chain, slumped the most in more than two years after cutting its annual profit forecast because of declines in its retail and international business.
The shares (SPLS:US) slid 15 percent to $14.27 at the close in New York for the largest drop since May 18, 2011. Staples has gained 25 percent this year, compared with a 15 percent increase for the Standard & Poor’s 500 Index.
Staples, which suffers from waning consumer demand for products such as ink and toner and computer accessories, cut its outlook after second-quarter results were weaker than it expected. Chief Executive Officer Ron Sargent said drops in international operations countered online growth and cost management. International sales fell 8 percent in the period ended Aug. 3, hurt by Europe and Australia.
The decreasing appetite for items such as ink is a trend that may continue as offices become more digital, Daniel Binder, an analyst for Jefferies & Co. in New York, wrote in a note to clients today.
Full-year earnings-per-share from continuing operations will be $1.21 to $1.25, the Framingham, Massachusetts-based company said in a statement today, trailing the $1.32 average of estimates compiled by Bloomberg. The company previously projected $1.30 to $1.35.
Revenue in the second quarter declined 2.2 percent to $5.3 billion, the fifth drop (SPLS:US) in six quarters. Sales will fall in the low-single digits for the year, the company said.
Sales have also been slowed by the weak quality of job growth in the U.S. that has skewed heavily toward part-time jobs that wouldn’t require as many office supplies, David Strasser, an analyst for Janney Montgomery Scott LLC in New York, wrote in a note to clients.
Strasser has a buy rating on Staples.
Staples’ stock gain this year has partly been caused by the expected benefit of the merger of Office Depot Inc. (ODP:US) and OfficeMax Inc. (OMX:US), Jefferies’s Binder said in the note. The combination of the second- and third-largest U.S. office-supply chains will be challenging and has the potential to lead to market share gains for Staples, Binder said. He has a hold rating on the shares.
Net income in the second quarter fell 15 percent to $102.5 million, or 16 cents a share, from $120.4 million, or 18 cents, a year earlier, Staples said. Analysts projected 18 cents, on average.
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