Hurt by sinking overseas sales, Staples (SPLS) disclosed a deeper-than-feared 15% slump in second-quarter profits on Wednesday and axed its full-year guidance.
Shares of Staples, which had been up almost 50% on the year, dove 13% on the earnings miss and below-consensus outlook.
The company said it earned $102.5 million, or 16 cents a share, last quarter, compared with a profit of $120.4 million, or 18 cents a share, a year earlier. Analysts had been anticipating EPS of 18 cents.
Revenue dropped 2.2% to $5.31 billion, narrowly trailing the Street’s view of $5.37 billion. Gross margins contracted to 25.6% from 26.1% even as expenses declined 1.7%.
Staples suffered an 8.3% tumble in international sales that offset a 2.3% increase in sales in the company’s North American stores and online.
"We drove online sales growth and aggressively managed expenses during the second quarter, but this progress was offset by weakness in our retail stores and international businesses,” Staples CEO Ron Sargent said in a statement.
Staples downgraded its 2013 EPS forecast to $1.21 to $1.25, which is well below consensus calls from analysts for $1.32. Previously, the company projected EPS of $1.30 to $1.35. Management expects sales to decline in the low single digits, compared with earlier calls for growth in the low single digits.
Despite the gloomier view, Staples sees generating more than $900 million of free cash flow in 2013 and plans to continue buying back shares.
Framingham, Mass.-based Staples saw its stock plunge 12.95% to $14.66 on Wednesday morning in response to the latest news.
Staples wasn't the only retailer heading south on Wednesday as apparel maker American Eagle Outfitters (AEO) tumbled 11% on the heels of an outlook downgrade of its own.