Staples (NASDAQ: SPLS), a seller of office supplies and a competitor of chains such as Office Depot (NYSE: ODP), OfficeMax (NYSE: OMX), and Wal-Mart (NYSE: WMT), reported Q2 earnings on Tuesday. Although they weren't that great, I can't say I felt they were a total disaster, either. I think the quarter was lackluster and indicative of the immense work ahead for management in terms of getting people into their stores and increasing sales per transaction.

According to the press release, total sales increased 9% and adjusted earnings per share declined 24% to 16 cents. That's a steep drop, but they did match analyst expectations. Staples used the increase it saw in free cash flow in a smart way: debt reduction. I approve of that move, to be sure.

Bright and early this morning, Office Depot (NYSE: ODP) announced that the global recession led to a fiscal first-quarter loss of 20 cents per share, down from a profit of 25 cents per share last year.

The office supply retailer stated that demand for office supplies, namely computers and other big-ticket items, dropped thanks to the economic slowdown. Taking charges out of the equation, ODP earned 10 cents per share, which was better than the estimated loss of 9 cents per share. This positive surprise pushed ODP shares higher in pre-market trading.

Staples (NASDAQ: SPLS), whose colleagues include Office Depot (NYSE: ODP) and OfficeMax (NYSE: OMX), is set to report earnings for the fourth quarter on Wednesday, March 11. The famous seller of office supplies has seen its stock go from a 52-week high of $26.57 all the way down to a 52-week low of $13.57.

Actually, that's one of the better ranges I've seen! Goes to show how bad things are out there. Staples saw its shares close at $14.63 on Monday, so a beat on the bottom line could really help things out.

Will management be able to beat? I don't have much confidence that it will, but that doesn't necessarily have to do with Staples per se, it's just that the economy's got me down on so many of these earnings prospects. Analysts are hoping for Staples to do about 42 cents per share in Q4, which would represent a 10% drop in the bottom line.

Rough day for office supply retailer Office Depot (NYSE: ODP) yesterday. The firm saw its shares fall slightly more than 13% after reporting a fourth-quarter loss of $5.64 per share. A year ago, ODP raked in a profit of seven cents per share, a stark turnaround thanks to the current economy. These results included charges of $4.54 per share and 37 cents per share, all of which stemmed from costs to close certain facilities, cut jobs and write-down assets. Adjusting the results for these changes, ODP lost 73 cents per share - still much larger than the six-cent loss expected by the Street.

Quarterly sales slumped 15% to $3.27 billion from last year's sales of $3.87 billion. Breaking the sales down a bit, the sultan of staples saw its sales in North America fall 17% - with international sales slipping 15%.

Poor Office Depot (NYSE: ODP). Have you checked the price of the retailer's stock lately? It closed on Wednesday with a value of $2.10. It actually rose over 11% that day upon news of its third-quarter earnings. I can assure you that I wasn't buying the stock.

The numbers didn't tell the story of a company that would make a worthy addition to a stock portfolio hell bent on hanging tough during a market meltdown. Instead, the 7% revenue decrease and the loss per share, on an adjusted basis, of $0.01 relate a tale of a business that one should ignore. At least that's the way I see things. Comps in the North American retail division were horrible. The return on invested capital as calculated by management took a significant drop. Let's face it, Office Depot just isn't cutting it. Granted, the economy is wreaking havoc on the business, but come to think of it, I don't really have a good picture of what the brand is supposed to be about. Well, I know it's about office supplies, but why should I shop there as opposed to Staples (NASDAQ: SPLS) or OfficeMax (NYSE: OMX)? Good question, huh? Looks like the retailer needs to get the message out as to why the shopping experience at its locations is of a higher value compared to the office stores mentioned. For that matter, I'm sure a lot of people use Wal-Mart (NYSE: WMT) to pick up office supplies too. My point is that management needs to step up its game and create some better marketing programs for its stores. Be creative like Staples. That "easy button" device is turning into a cool cultural icon (well, I might be exaggerating, but I think it's creative, at any rate).

Earlier, I said "at least that's the way I see things" in terms of my opinion about the sad state of Office Depot, but I suppose I should point out that there are obviously a lot of investors out there who don't see a lot to love when it comes to this chain. The stock is down over 63% on the one-month period at the time of this writing. I see no reason to speculate on this business. The economy isn't getting better, and Office Depot just doesn't seem to be in a strong position. What will it take to turn things around? Like I say, in addition to hoping for an improved macro climate, come up with a better advertising campaign, build a more intense connection with the consumer. Office supplies are commodities, but shopping experience is not. That's the opportunity. Differentiating a brand from the competition based on things like customer service and an easy time of it at the checkout register is a traditional strategy in the retail industry. If Office Depot can offer something in that area, it should let me know about it. Since just about every retailer is struggling to keep the traffic coming into their chains, now is the time to exploit the other guy's weakened state and grab every customer possible.

Disclosure: I don't own any company mentioned; positions can change at any time.

Oil was down another $5.00 per barrel today, yet that failed to cause a major rally despite a $9.00 in just two days. Today's end of day rally was led by financials after an FDIC conference which led to excitement about the sector. If you were looking for any brightness in home sales, May's pending home sales came in at -4.7% year over year. We also saw wholesale inventories in May rise by +0.8%. Perhaps more interesting is that the MAY Consumer Credit rose more than expected to $7.8 Billion. Below are the unofficial closing bell levels for today:
DJIA 11,384.21 (+152.25)
S&P500 1,273.68 (+21.37)
NASDAQ 2,294.42 (+51.10)
10YR T-Note 3.88% (-0.05%)
52-WEEK LOWS
TOP 10 ANALYST CALLS

Hank Paulson's speech gave some support after his speech didn't ring of the "Death of GSE's" and shares of Fannie Mae (NYSE: FNM) were up over 10% at $17.40 in today's final minutes.

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.

Office Depot (NYSE: ODP) is recently trading at $8.86 in pre-open trading, below its close of $10.41.

ODP announced Q2 same-store sales fell nearly 10% versus the prior year. ODP will announce Q2 EPS on July 30. ODP expects its profit margins to improve sequentially in the third and fourth quarter.

ODP July option implied volatility is at 74, August is at 69; above its 26-week average of 54 according to Track Data, suggesting larger price movement

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Shares of office supply retailer Office Depot Inc. (NYSE: ODP) have been surging in the premarket despite the fact that company reported a big fall in its first-quarter profit. However, Office Depot was able to report earnings per share that topped analysts' forecasts, giving a lift to its shares.

The retailer reported that quarterly profit plunged 55% to $68.8 million, or 25 cents a share, as the housing meltdown brought deep declines for the company's sales in Florida and California. These numbers are down from $153.8 million, or 55 cents a share, a year ago. Excluding one-time items, Office Depot's earnings would have come at 29 cents a share. Analysts' forecasts (which typically exclude one time items) were for 22 cents per share.

Looking at revenue, Office Depot saw a drop of 3.2% to $3.96 billion, as the retailer faced North American sales declines. Analysts predicted a higher revenue of $4.07 billion for the quarter, according to Thomson Reuters.

Staples Inc. (NASDAQ: SPLS), a supplier of office products and a fierce competitor of both OfficeMax (NYSE: OMX) and Office Depot (NYSE: ODP), reported earnings for the fourth quarter yesterday. Excluding an extra calendar week, Staples saw its net sales rise by 8% to $5.3 billion and its diluted earnings per share rise by 15% to $0.47. For the full year, again excluding the extra week, net sales increased 9%; adjusted diluted earnings per share rose by 15%, coming in at $1.42. The full-year results included various adjustments related to tax issues, litigation, and stock compensation.

The numbers are okay, I suppose, but they don't necessarily make me want to jump into the stock. For one thing, same-store sales for North America declined 3% for the year (they did rise a modest 2% in Europe, however). For another, the stock is only yielding about 1.5% right now -- I'd wait for a bigger yield before thinking about Staples. Yes, it's true that the company increased its annual dividend by 14%, but I'll tell you something about that -- I am not a fan of annual dividends. I'd rather get my payout spread throughout the year.

Staples is a major brand in office supplies, and I do shop there. But nothing about this earnings report makes me want to check the retailer out any further, at least at this time. I'll have to see a few more quarters to see how the company handles the current economic malaise; for now, there are better ideas out there for one's investment dollars.

Office Depot (NYSE: ODP) closed at $13.81 Thursday, near a six-year low.

ODP has a market cap of $3.7 billion. ODP has long term debt of $581 million. ODP reported total September 2007 revenue of $3.9 billion. ODP has been frequently mentioned buyout candidate over the last two years.

ODP overall option implied volatility of 59 is above its 26-week average of 49 according to Track Data, suggesting larger risk.

Computer Sciences (NYSE: CSC) closed at$39.20 Thursday.

CSC is scheduled to report EPS on February 4. CSC

February option implied volatility of 44 is above its 26-week average of 33 according to Track Data, suggesting larger price fluctuations.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

MAJOR PAPERS:

• The Wall Street Journal reported that General Electric Company's (NYSE: GE) NBC Universal may soon announce an agreement with TiVo Inc (NASDAQ: TIVO), a rival of Nielsen Media Research, for access to TiVo's viewership ratings data, as well as to sell its advertisers TiVo products such as interactive tags used to identify an advertiser on their ad.
• The WSJ also reported that pressure from the White House and Congress, as well as its own internal debate, may kill the FCC's proposal to impose tougher regulations on the cable industry.

WEB SITES:

• Hedge fund Ziff Asset Management disclosed a 6.4% stake in Office Depot Inc (NYSE: ODP) Monday, making it the second-largest holder with 17.6M shares, according to Barron's Online's "Inside Scoop" column.
• In an effort to build increasing demand for Western cars, General Motors Corporation's (NYSE: GM) Europe branch is set to built high-volume Opels in Russia, AutoNews.com reported.

MOST NOTEWORTHY: Dick's Sporting, Ericsson and Deutsche Telekom were today's noteworthy upgrades:

• Citigroup upgraded shares of Dick's Sporting (NYSE: DKS) to Buy from Hold based on valuation, margin expansion and increased visibility.
• Ericsson (NASDAQ: ERIC) was raised to Buy from Hold at WestLB on valuation following yesterday's sell-off. The firm feels investors need to look beyond 2008.
• Lehman upgraded shares of Deutsche Telekom (NYSE: DT) to Equal Weight from Underweight as they believe earnings momentum will be seen in the near-term.

OTHER UPGRADES:

• UBS upgraded Nova Chemical (NYSE: NCX) and Orient-Express (NYSE: OEH) to Buy from Neutral.
• Office Depot (NYSE: ODP) was upgraded to Neutral from Underperform at Credit Suisse.
• Goldman upgraded AON Corp. (NYSE: AOC) to Buy from Neutral.

MOST NOTEWORTHY: Ericsson, Circuit City and Hot Topic were today's noteworthy downgrades:

• Societe Generale downgraded shares of Ericsson (NASDAQ: ERIC) to Hold from Buy after the company lowered its Q4 guidance. Goldman Sachs downgraded shares to Neutral from Buy on the company's lowered Q4 revenue outlook and the growing probability that the wireless infrastructure market will decline again in 2008.
• Circuit City (NYSE: CC)'s rating was lowered to Neutral from Overweight at JP Morgan, as they believe the company's high cost turnaround will require a strategic partner or acquirer, which may not happen until after 2H08 and this year's holiday season.
• Citigroup downgraded shares of Hot Topic (NASDAQ: HOTT) to Hold from Buy to reflect their pushed out expectations for an earnings recovery.

OTHER DOWNGRADES:

• Office Depot (NYSE: ODP) was downgraded to Peer Perform from Outperform at Bear Stearns.
• Lehman downgraded Telecom Italia (NASDAQ: TI) to Underweight from Equal Weight.
• Goldman removed Freeport McMoRan (NYSE: FCX) from its Conviction Buy List.

Office Depot, Inc. (NYSE: ODP) stock is falling this morning on news that it does not expect fourth quarter sales to match sales from the third quarter. Q3 results reported today were solid, as the company posted 43 cents EPS against expectations of 40 cents, but the company's outlook for the holiday dragged down shares and in this morning's conference call, ODP warned that 2008 first quarter sales could also drop off. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ODP.

After hitting a one-year high of $42.03 last November, the stock hit a one-year low of $16.51 in October. This morning, ODP opened at $18.08. So far today the stock has hit a low of $17.82 and a high of $18.71. As of 10:55, ODP is trading at $18.25, down 55 cents(-2.9%). The chart for ODP looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.