OFFICE SUPPLIERS UNDER PRESSURE

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OFFICE SUPPLIERS UNDER PRESSURE

 user 2008-10-29 at 11:01:21 am Views: 98
  • #20686
    http://money.cnn.com/news/newsfeeds/articles/apwire/20227e6b4a2310bd34b6de65edc72ec5.htm
    Office suppliers under pressure
    Goldman Sachs says office supply chains to face ‘severe pressure’ because of economic downturn
    New
    youk – Goldman Sachs cut its earnings estimates and price targets for
    the nation’s three largest office supply chains on Tuesday, saying the
    trio will face “severe pressure” amid the country’s escalating economic
    downturn.Matthew J. Fassler told investors in a research note that he’s
    concerned about “structural erosion” for OfficeMax Inc., Office Depot
    Inc. and Staples Inc.”Same-store sales were already very weak before
    the drop-off in retail sales and business activity that began in
    mid-September,” he wrote. “Because sales trends in the retail segments
    of these companies had underperformed typical relationships with macro
    factors, we’ve been concerned about structural erosion of that
    channel’s viability.”

    Fassler lowered his price target on
    Naperville Ill.-based OfficeMax to $6, down from $16. The company is
    set to report third quarter results on Friday.Meanwhile, he cut his
    price target on Office Depot to $3.75, down from $9. He also cut
    Staples to $18, down from $24.He rates all three stocks
    “Neutral.”Fassler said both Framingham, Mass.-based Staples and Office
    Depot, which have significant overseas revenue and profits, will likely
    be hit by the impact of slowing European economies and weakening
    foreign currency.Meanwhile, he said Delray Beach, Fla.-based Office
    Depot, which reports third quarter results on Wednesday, represents an
    “intriguing opportunity” for investors interesting in high-risk and
    high-reward opportunities because of the company’s low stock price.

    Fassler
    said Office Depot has no immediate liquidity threat and appears to be
    below borrowing caps that could trigger debt covenants, but added the
    company’s earnings are under pressure, which could hamper
    results.OfficeMax shares were unchanged at $3.27 in pre-market trading
    Tuesday while shares of Office Depot held steady at $1.60. Staples
    shares were unchanged at $13.67.