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And office over supply is back to school season -- up should you be giving these retail stocks another look.
Or is -- just too much competition from -- -- like Wal-Mart Amazon.
Morningstar analyst Jocelyn McKay joins us ahead of office Depot's earnings thanks so much for joining us.
Thanks so much for having me so let's start to detail abroad from there you expect office Depot's reporting tomorrow Tuesday what -- expected here.
We expect to see some soft.
Earnings from Office Depot especially on the backs of what office Max -- -- last Thursday.
I in office Depot's first quarter management did point to the fact that they expected -- earnings in -- second quarter.
Can say it we're not get it that -- that are gonna see anything deaf friend.
I think we're gonna see a little bit worse than a quarter relative to first quarter.
I think that the structural headwinds that and being created -- -- macroeconomic environment really going to be accelerated.
As customers -- traded down to a Wal-Mart or Amazon to get there are opposite problem while.
It is the economy go and how much of it is just a broken business model -- mean it strikes me that -- people are out shopping for school supplies or office supplies.
You have Wal-Mart you have target you have all these other places.
Where are they just as competitive if not better price.
That's correct and these are commodity like products it's it's paper -- you're not getting get a better quality product shopping one thing it's very out there.
You're -- want the lowest cost and product seeking -- And Amazon and Wal-Mart can really offer those those low cost products so what happens to these guys and we did they all go out of business is gives.
One may be Staples as the best of the bunch I think we look at a star chart you can see that Staples has done better over time.
I mean today find a way to differentiate themselves is there one man standing what happens.
I think of the three state.
-- is definitely the best position to provide its people still is really gonna face an uphill battle in the space.
Especially now that Amazon has really gone after that beat -- -- this -- But Staples with -- appeared -- -- distribution efficiency is.
Really does have the potential to -- -- last man standing here.
We see -- office Max and Office Depot closing their stores quarter after quarter.
Which is really the right thing to do we really have a glut of office products stories.
So would you would you recommend Staples in light of all that or would you just stay away from the whole group.
Right now I I think now is not the right time -- to get into the names just because they think we are gonna see some softness in the second quarter.
But I think he is stable management has noted that they are gonna see them after -- in the -- cap the air.
Staples also has that another twist to it is that is expected -- a lot of the headwinds going on over in Europe.
But about twenty -- -- 5% their business.
Did direct from international sales so.
I think we really require a -- -- higher margins safety but if you are looking for exposure to the opposite -- -- beaters.
Staples is the only one that we think is it is a good -- at this point all right jostle McKay thinks cannot.
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