Sector Preview: Economy to weigh on office product cos.
NEW YORK—As economic worries weigh on the sector and the dust settles on Office Depot Inc.'s struggles with a dissident shareholder group, office product suppliers prepare to issue quarterly results.
Last week, Office Depot said shareholders re-elected all 12 of its directors at its annual meeting, according to a preliminary count of stockholders' votes. The news came a week after a dissident shareholder group canceled its proxy contest for two board seats after four major proxy advisory firms recommended Office Depot shareholders vote its nominees.
The Woodbridge Group had wanted to replace Office Depot Chairman and Chief Executive Steve Odland and former Chairman and CEO David I. Fuente.
Scott Tilghman of Soleil Securities Group Inc. said in a client note that the proxy contest was a distraction "potentially delaying operational improvements." In addition, Office Depot's sales have slumped in Florida and California, largely because the weak housing market had impacted businesses in the region.
The sector, along with many other industries, has been pressured as consumers tighten spending due to the ongoing housing downturn, diminishing credit, increasing food and fuel costs and recession fears.
Data shows Delray Beach, Fla.-based Office Depot did have weak sales during the quarter, but because expectations are so low it is not likely quarterly results will disappoint, Tilghman explained.
Office Depot, the nation's second-largest office supplies retailer behind Framingham, Mass.-based Staples Inc., is set to report its first-quarter results on Tuesday.
Meanwhile, Goldman Sachs analyst Matthew Fassler favors OfficeMax Inc., citing the Naperville, Ill.-based company's attractive stock price and its ability to deal with fluctuating economic conditions.
OfficeMax will report first-quarter results on Wednesday.
Mike Baker of Deutsche Bank North America predicts an OfficeMax profit of 69 cents per share on sales of $2.38 billion. He expects the sector's sales to continue to be squeezed the rest of the year due partly to the housing slump and slowing employment growth.
He maintained "Hold" ratings on both OfficeMax and Office Depot.
On average, analysts polled by Thomson Financial predict a first-quarter profit of 68 cents per share at OfficeMax on sales of $2.34 billion. Office Depot is expected to have earnings of 24 cents per share on revenue of $4.08 billion.
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