This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Important Lesson of Staples’ Fall is Technology Destruction

Stocks in this article: SPLS ODP UPS FDX WMT AMZN

NEW YORK (TheStreet) -- Technology is creative destruction in action.

Take Staples (SPLS) . In the 1990s, the stock was a highflier, a classic big-box store that was devouring technology retailers. That made sense, because office-supply stores were the first technology super-centers, offering adding machines, cash registers and typewriters a century ago, when those were new ideas.

>>Read More: Warren Buffett’s Top 10 Dividend Stocks

Staples' shares peaked again, near the end of the housing bubble in 2007, at more than $27, giving the company a valuation of more than $17.5 billion. It's now at $8.1 billion.

The shares got a pop on Tuesday to $12.63, after a Credit Suisse analyst speculated that the company might merge with rival Office Depot (ODP) , which had swallowed OfficeMax.

Staples' stock was trading Wednesday morning at $12.86, up 1.9%. The shares have fallen 19% year to date, compared with a 3.4% gain for the Dow Jones Industrial Average.

Office Depot and Staples have been moving in tandem for some time, and Office Depot reiterated its earnings forecast Tuesday. It expects lower sales than last year.

Maybe Staples should have gone into 3-D printing, or services, and it has tried to expand into postal services against UPS (UPS) and FedEx (FDX)  .

What matters to investors is that Staples is closing stores and warning of lower sales.

>>Read More: Cramer: What’s Working, What’s Not

My late father owned a TV repair shop. It helped raise me. He got out in 1973, and when I returned to town five years later, the shop was gone, a victim of "solid-state" electronics that made such products cheaper to scrap than fix. The whole TV business is dead now that flat screens have replaced picture tubes. I wonder why thieves bother to steal them.

Most of my life since has been spent in the print media, but that, too, has been undermined by the rise of the Web. A big reason that unemployment has remained high is that jobs are gone, permanently, and new ones have not evolved to take their place.

Staples isn't in trouble because Walmart (WMT) or Amazon (AMZN) do what Staples does better. We don't fax anymore. We seldom print, and PCs and servers are being replaced by tablets and the cloud. The name says it all, Staples. My kids seldom use them, and their kids won't know what they are.

A Staples representative wasn't immediately available for comment.

As an investor, you have to be on the lookout for markets that technology is destroying and then get out as soon as you can. I wouldn't want to be an office developer these days, because middle management is disappearing. Office buildings today are software factories, sales rooms for lawyers or medical clinics. Maybe trading rooms.

What industries will go next? Will it be cars, which are evolving to be self-driving and rented rather than sold? Will it be retailing in general, replaced by sites such as Amazon? Or might it be those ubiquitous medical parks, replaced by docs in boxes? Personally, I'm hoping it will be law offices, but that's just me, and much of the industry's infrastructure is dying with the office-supplies niche.

I don't know. What I do know is that as important as it is to find the next big thing, it's vital to find the next dying one, too, and get out of it while you can.

>>Read More: Hubris of Market Bulls; Second-Quarter Big Picture: Best of Kass

At the time of publication, the author owned shares of Amazon.

Follow @DanaBlankenhorn

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


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, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, poor profit margins and weak operating cash flow.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs