In this segment fromtheMotley Fool Moneyradio show, the team looks at the bullish trading behindoffice supply retailer Staples (NASDAQ: SPLS), which announced it is looking for a buyer. Despite the company's struggles, it has successfully implemented some changes that could make it a tempting acquisition target.
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A full transcript follows the video.
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This video was recorded on April 7, 2017.
Chris Hill: Shares ofStaplesupmore than 10% this week after the company said it is looking into selling itself.Staples tried to merge withOffice Depotlast year,and that was shut down due to antitrust concerns. What do you think, Jason? You got $7 billion in your pocket, do you want to buy Staples?
Jason Moser: I think any retailer not named Amazonisprobably pretty easy to make fun of these days. But actually,I could see some attraction here. It's not an easy task, mind you, but there are some signs, at least, that this is a pretty successful business that is growing into a 21st century retailer. If we look at the metrics that they've turned from 2011 to today, delivery hasbecome a more substantial part of their business. They're relying less on people going to the store and relying more on getting thatproduct to their customers. And that's playing on the bottom line, as delivery accounts for a full 75% of the company's operatingprofit. And it's the No. 5 e-commerce player in the space.I know that's a bit surprising, but they're the No. 5 e-commerce company, behindAmazon,Apple,Dell, andWal-Mart. So, clearly, they'redoing something right. On the flip side, there are challenges. The top line is shrinking. Margins are getting squeezed. But again, they are doing some good things and investing in the 21st century new retail space, and I could see how, perhaps, private equity might see some attraction here.
Hill: I think there aresome people who agree with you,because earlier this week, you had Panera, that was in play before the JAB deal was announced,and then this news from Staples, and both those companies had roughly the same market cap. I just looked at them and thought, "Gosh, one is arestaurant that turned itself around quite nicely,Staples has been struggling. This seems like a no-brainer,if you have $7 to $8 billion, and you want to buy one of them." I put that out onTwitter and a bunch of people were like, "Put me in for Staples, because they have the office businesses kind of locked up."
Moser: Theyhave a pretty good hold on it. Again, it's just a matter oftaking that big physical footprint they already have and using it in a different way. Instead of getting people to come there, they're using it as a way to get product from point A to point B. And we know that, today, it's more about convenience, it's more about value. Customers now, it's more about how they value their time, versus saving, atthe end of the day, with what you're paying at the store. Itsounds like Staples is playing into that a little bit,and it's working, to an extent.
Chris Hill has no position in any stocks mentioned. Jason Moser owns shares of Apple and Twitter. The Motley Fool owns shares of and recommends Apple and Twitter. The Motley Fool owns shares of Panera Bread and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy.