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Stock Analyst Update

Staples Stands Out Despite an Ice-Cold Climate

Stock has a lot more upside than downside potential at current levels.

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What Happened?
Staples (SPLS), the world's largest office supply superstore based on market cap, reported third-quarter sales growth of 17% Tuesday morning. Earnings per share declined 5% from the same period a year ago, missing First Call consensus estimates of $0.21 by $0.02. Sales and earnings were hurt by several factors, including slowing consumer spending, competitive pricing pressures, new store opening costs, and a new distribution center. Most of the company's top-line growth came from new store openings and e-commerce sales. Sales at comparable stores, or stores open at least a year, rose just 4% in the quarter from the same period last year.

What It Means for Investors
At its current price, there is a lot more upside than downside potential in Staples' stock. Although we are cautious about recommending any office supply retailers given industrywide pricing pressures, Staples is by far the strongest of the three major ones. The company continues to take market share from Office Depot (ODP) and OfficeMax (OMX), and has a tighter rein on expenses than these two.

Mark Sellers does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.