It looks like it's really happening now. The ripple effects from the troubled housing market are showing significant impact on the larger economy. The repercussions are being felt from the safety of home all the way to the office -- well, Office Depot (NYSE: ODP), anyway. The company watched its stock fall just over 6% after its earnings release. In fact, the entire office supply industry suffered, with Staples (Nasdaq: SPLS) and OfficeMax (NYSE: OMX) watching their stocks drop as well, even though they have yet to announce quarterly results.
The second quarter was the first in two years in which Office Depot failed to report double-digit earnings-per-share growth. Instead, it reported a 2.4% drop and net profit fell 7.8% to $109.1 million in the second quarter.
The company need look no further than its North American market to find the cause. North American sales edged up 1% in the quarter, but
comps dropped 5% lower. With the housing market continuing to plummet, there was no need for homeowners to purchase new office furniture, which negatively affected comps by 160 basis points. International shoppers did their best to counter the dismal North American performance, pushing sales 14% higher.
With the economic slowdown expected to continue (it looks like it's just getting started), Office Depot is cutting back on its aggressive growth plans. For 2007, it now expects to open 125 new stores as opposed to the 150 it had originally planned. As proof that management expects the economy to remain soft, it has also lowered its growth projections for 2008, reducing from 200 to 150 the number of new locations it anticipates opening.
http://www.msnbc.msn.com/id/19995012/
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