Look for shares of Office Depot (NYSE: ODP) to take a beating today after the office supplies retailer shocked Wall Street by predicting a huge drop in its second quarter same-stores sales.Office Depot is going to announce its second quarter numbers later this month, and investors got a better picture of just what to expect this morning after the company stated that it is now forecasting a 10% drop in its same-store sales for the quarter, citing the slowing American economy as the main reason.
The company also warned it expects the remainder of the year to remain difficult. While the retailer believes that sales trends should improve slightly, it is remaining pessimistic. Margins for the quarter, it says, have declined by about 200 basis points than what it had previously anticipated. Even before today's revision, the company had estimated about 200 to 250 basis point decline in its margins. Looking at the rest of the year, the company thinks that its margins should increase sequentially in both Q3 and Q4.
Investors had been hoping that this second quarter would be an improvement over the company's dismal first quarter, but now that is not looking to be. The company is expected to announce earnings of 21 cents per share when it next reports on July 30, but now you have to start wondering if it will actually be able to hit that target. Even if it could hit 21 cents per share, this is still about a 51% drop from the 43 cents per share that it was able to earn during the same period last year.
The last time the company reported earnings was back on April 29 when it showed earnings of 29 cents per share, beating analyst estimates, but still a year-over-year drop of nearly 52%. Looking at the chart below, you can see just how the stock has traded since its last reported earnings.
Shares of the stock are getting beat up pretty hard in premarket trading, with early trading showing the stock down about 15%.
This adds to a rather difficult previous 12 months, which has seen the stock drop from over $30 a share, down to yesterday's close of $10.41.
For a better idea of just how hard things have been for Office Depot shareholders, let's close by taking a look at a 52 week chart on the stock:
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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