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Staples (SPLS) issued Q3 results early this morning, and the market loved them. In afternoon trading, the stock was bid higher by over 6%, with awesome volume backing the trade.
According to the press release, total sales decreased 6%. Earnings per diluted share declined as well, dropping 7% on an adjusted basis to 39 cents. That was good enough, though, to beat expectations by a penny, as indicated by our preview piece.
Same-store sales weren't great for the chain that competes with Office Depot (ODP) and OfficeMax (OMX). They came in flat for the North American market. In Europe, they were down 9%. However, North America did see an improvement compared to last quarter. And management cited improved traffic trends as a driver.
Cash flow was excellent. Not only did money generated from operations increase, but the company was able to take free cash flow and apply a bunch of it to debt. Another positive element can be found in the reaffirmation of guidance related to the Corporate Express acquisition.
Staples hit a new 52-week high today. On a valuation basis, I think it might be getting a little pricey. From a technical angle, the stock clearly wants to go higher. Investors are apparently encouraged by the current strategies in place and believe that sales and earnings growth will return over time.
If you want to add this business to your portfolio, be certain not to buy all at once. And I would not put in an order for shares today. I'd try to get a better price after the earnings excitement abates.
Disclosure: I don't own any company mentioned; positions can change without notice.
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