Why Office Depot Shares Soared
Sep 5th 2012 5:27PM
Updated Sep 5th 2012 5:34PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of office-supply specialist Office Depot (NYS: ODP) jumped as much as 20% today after the retailer and some of its peers affirmed a positive full-year outlook.
So what: Speaking at the Goldman Sachs retail conference, management said it still expects an adjusted operating profit of $125 million to $135 million for the year, which would be about a 5%-10% improvement over last year's figure.
Now what: The huge gain in share price is more of a reflection of the stock's overall weakness than any significant good news. The stock is still down 50% from its 52-week high and worth just a fraction of what it was when it topped $40 back in 2006. At a P/S of just $0.04, shares might look incredibly cheap, but considering macroeconomic factors like the transition to online retail and digital communication, the office-supply superstore concept does not seem long for this life. I'd stay away.
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