Staples Sends Message To Short Sellers on Earnings (SPLS, ODP, OMX)

Staples Inc. (NASDAQ: SPLS) was a down and out retailer… Keyword: WAS.  This morning’s earnings report has done two things.  First, it has shown that even the world of office supplies cannot be killed entirely by the internet.  Second, this may have taken out many short sellers.  The only thing that is a surprise so far is that Staples is not higher.

The company’s second quarter earnings rose more than 35% as it improved on sales.  This translated to $0.22 EPS and Thomson Reuters had estimates of $0.20 EPS.  The company sees next quarter earnings in a range of $0.46 to $0.48 EPS and sees sales gaining by the low single-digits while Thomson Reuters has estimates of $0.46 EPS.

Staples sees 2011 adjusted earnings at $1.39 to $1.45 EPS versus a prior range of $1.35 to $1.45 EPS, and the actual was put at $1.42 to $1.48 EPS.  Whichever figure you use, Staples is ahead of plan (Thomson Reuters has estimates of $1.37 EPS) at a time when uncertainty is supposed to be taking down numbers rather than helping numbers.  The company also backed 2011 sales growth in the low single-digits.  As far as free cash flows, that is projected to be more than $1 billion for the year.

So, here is why today’s results are also catapulting the stock… The most recent short interest data was 30.49 million shares.  That is the highest reading in at least a year when the settlement day’s price was $16.06.  At the peak of selling last week, Staples actually dipped under $12.00 briefly.  Shares are up 1.5% at $14.44 so far but profit taking has taken shares down from nearly $15.50 earlier this morning.  The 52-week range is $11.94 to $23.75.

The rival in office products is Office Depot, Inc. (NYSE: ODP) and the stock was raised to Neutral from Sell by UBS this morning.  OfficeMax Incorporated (NYSE: OMX) is up 0.5% at $6.11 today as well.

Maybe the world of office supplies and real products is not as dire as it seemed before last week.

JON C. OGG