Portfolio Manager Ric Dillon of Diamond Hill Capital Management says that his firm bought and sold Staples, Inc. (SPLS) due to less-than-expected earnings and revenues resulting from Amazon’s (AMZN) gains and the outcome of Office Depot (ODP) and OfficeMax’s consolidation.
“Staples’ market of course is undergoing a lot of change like a lot of retailing is. Competition from online services like Amazon, in particular, have led to some consolidation, and the number-two and number-three players in the market, Office Depot and OfficeMax have merged,” Dillon said.
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Dillon says his firm underestimated how much market share the Amazon online business was taking, as well as the time it has taken for the rationalization of Office Depot and OfficeMax, which negatively affected Staples.
“The merger took a little longer to occur, and [Office Depot] just recently announced 400 store closures, so Staples has been a little disappointing,” Dillon said. “They had earnings less than we expected and revenues less than we expected, primarily because they were not getting the market share gains from Office Depot, OfficeMax that we expected.”
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