OFFICE SUPPLIERS UNDER PRESSURE

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OFFICE SUPPLIERS UNDER PRESSURE

 user 2008-10-29 at 11:00:44 am Views: 85
  • #20759

    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.