Staples Inc (SPLS.O) reported weaker-than-expected quarterly results on Wednesday on dismal sales in international markets such as Europe and Australia, prompting the largest U.S. office supply retailer to cut its outlook for the year.
Shares of Staples tumbled 12.4 percent to $14.75 in trading before the market opened.
Less customer traffic led to a 6 percent decline in sales at European stores open at least a year. The company also tied some of the weakness to the closure of 49 European stores.
While Staples has done better than rivals Office Depot Inc (ODP.N) and OfficeMax Inc (OMX.N) and has higher market share in the United States, the industry leader has struggled abroad due to economic weakness in Europe that has hurt sales to both corporate customers and individuals.
The results and outlook "while disappointing, were not entirely surprising given the still tepid U.S. macroeconomic environment and even worse conditions internationally," BB&T Capital Markets analyst Anthony Chukumba said in a note.
Chukumba still has "a fairly bullish view" of the industry leader citing its efforts to cut costs and the pending merger of its smaller rivals Office Depot and OfficeMax.
Net earnings fell to $102.5 million, or 16 cents a share in the second quarter that ended on August 3, from $120.4 million, or 18 cents a share a year earlier.
Analysts on average were expecting a profit of 18 cents a share, according to Thomson Reuters I/B/E/S.
Sales fell 2 percent to $5.31 billion, falling short of the analysts' average estimate of $5.37 billion. Sales in the international business lost 8 percent.
For the full year, Staples said it expected sales to fall at a low single-digit percentage rate rather than the low single-digit rise it had forecast in May.
Analysts were expecting sales of $23.64 billion, down from $23.9 billion in the prior year.
Staples forecast earnings of $1.21 to $1.25 a share from continuing operations for this year, down from its May outlook of $1.30 to $1.35 and below analysts' estimates of $1.32.
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