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By Jason Stipp and Jeremy Glaser | 02-22-2013 06:00 AM

The Friday Five

Five stats from the market and the stories behind them. This week: Fed's $40 billion bond buys in question, Wal-Mart's worrisome 1% same-store sales growth, and more.


Jason Stipp:
I'm Jason Stipp for Morningstar ,and welcome to The Friday Five: Five stats from the market and the stories behind them. Joining me as always with the numbers is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for being here.

Jeremy Glaser: My pleasure, Jason.

Stipp: So, what do you have for the Friday Five this week?

Glaser: We are going to look at the number 2,000, $40 billion, 1%, 4, and finally 47.3.

Stipp: 2,000 is a number of stores that the combined OfficeMax and Office Depot will have after the merger. That merger was announced this week, but you don't seem especially excited about this news, Jeremy?

Glaser: I think both these management teams are probably looking for that Staples "Easy Button" this week as they ran into a few problems. The first was the actual announcement of the merger. It kind of leaked a little bit early in a press release--probably in a place where it wasn't supposed to be. Then it was retracted, then had to come out again. It definitely had the sense that the announcement was somewhat thrown together. We are still missing some details in terms of management team, in terms of branding, in terms of some other things that are pretty important to assessing the prospects for this merger.

But they probably also want that Easy Button so that they can try to replicate the success that Staples has had in the space, particularly compared to OfficeMax and Office Depot. Our analyst Liang Feng, who has looked at this deal, sees that the combined company will have about 2,000 stores versus 1,900 for Staples, but the combined new OfficeMax-Office Depot will only get 70% of the revenue that Staples has and a tenth of the operating income. So, even if you assume that there are going to be some really impressive synergies, that they are going to be able to cut a lot of corporate costs, that somehow they are going to be able to drive higher revenue and get higher productivity out of their stores, these two are still going to be struggling next to the industry leader, which is Staples. And they also have a host of competition from people like Costco and Amazon and other players that that are moving into that space. So, this merger probably makes things no worse. It's probably something that they have to do in order to stay at all competitive, but it doesn't remove a lot of their core problems with their no-moat positioning.

Stipp: $40 billion is the amount of money that the Fed is shelling out [monthly] for mortgage-backed security purchases as part of its so-called QE3. This number came into attention this week because there are concerns about how long these purchases are going to go on. It gave the market a bit of a fit. What's your take?

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