NEW YORK (TheStreet) -- Shares of Staples Inc. (SPLS - Get Report) are down -3.01% to $11.27 on very heavy trading volume after the office products company said its sales could fall in the current quarter as it sells fewer computers and core office supplies such as ink, toner and paper in North America amid stiff competition from online retailers and big-box chains, Reuters reports.
Click the video below for more on what has analysts concerned about Staples:
The company, facing stiff competition from mass merchants such as Walmart Stores (WMT - Get Report) and online retailers such as Amazon.com (AMZN - Get Report) , announced several promotions for the back-to-school season, Reuters said.
Sales in its North America retail business, under which it sells core office supplies as well as break room items and copy and print products, slid 6% in the second quarter.
The business accounted for about 43% percent of Staples' total sales in the quarter.
TheStreet Ratings team rates STAPLES INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate STAPLES INC (SPLS) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has slightly increased to $359.85 million or 3.53% when compared to the same quarter last year. In addition, STAPLES INC has also modestly surpassed the industry average cash flow growth rate of -5.57%.
- SPLS's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.74 is somewhat weak and could be cause for future problems.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 43.4% when compared to the same quarter one year ago, falling from $169.93 million to $96.21 million.
- The gross profit margin for STAPLES INC is currently lower than what is desirable, coming in at 26.94%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 1.70% trails that of the industry average.
- You can view the full analysis from the report here: SPLS Ratings Report