) $19 target to $17, and maintains the neutral rating.
Analyst Mark Rowen says Office Depot significantly lowered third-quarter and 2004 guidance. He notes the company lowered its sales outlook across all three business units, and noted that North American Retail and European contract sales are tracking well below expectations. Also, recent hurricanes in Florida resulted in lost sales and unexpected expenses.
Conversely, he notes Staples recently said the impact of Florida hurricanes wasn't material to the third quarter, and that its back-to-school season was "good so far." Therefore, he believes Office Depot suffers from executional issues. He says although the valuation of Office Depot is more compelling, he needs to see signs of sustainable growth and operating improvement.