Staples' Weak 4Q Not Dictating 1Q Trends, JP Morgan Maintains Overweight

JP Morgan has published a research report on Staples SPLS after the company reported 4Q earnings affected by weather and low quality, while 1Q trends are looking more positive. In the report, JP Morgan writes "SPLS reported 4Q10 operating EPS of $0.39 vs. consensus and our estimate of $0.40. Note a lower than anticipated tax rate aided results by ~$0.06 and the company called out a total $0.05 impact from weather ($0.03 of sales and $0.02 of promotions). Total sales were up 0.1% vs. guidance of LSD, with NA Retail comps at (2.0%), below our (2.0%) estimate driven by unfavorable weather. In spite of weather, NAD sales rose 2.7% vs. 2.5% in 3Q and 1.0%E, with a significant 490-bp sequential improvement in the two year run rate. On the International front, local currency sales trends improved 100 bps to flat vs. (1.0%) in 3Q and the two year trend improved by 340 bps, but revenues nontheless missed our forecast." JP Morgan maintains its Overweight rating on Staples, which closed yesterday at $20.86.