PC market deteriorating fast, says Staples

Office supplies giant says tablets will overtake PCs very soon as weak Q2 results spark 15 per cent share slide

Staples has warned that the PC market is "deteriorating fast" as it posted weaker-than-expected results and slashed its profit forecasts.

The office supplies giant saw its shares freefall by 15 per cent yesterday as it logged a two per cent drop in Q2 sales, which it blamed partly on faltering sales of traditional PCs. It also slashed its profit expectations for the full year.

The results underline long-held concerns that Windows 8 is failing to bolster a PC market battered by muted consumer spending and the shift to tablets. HP last night admitted the PC market is not stabilising as fast as it had hoped as its sales of the struggling form factor fell 11 per cent, while last week Dell posted a 72 per cent plunge in quarterly profit as end-user computing sales fell five per cent.

Speaking on a Q2 conference call, a transcript of which can be found here, Staples executive Demos Parneros blamed the retailer's sales slump on PCs and related peripherals and software.

"They have no chance to grow; they're just deteriorating fast," he said.

The split between computers and tablets is currently 60:40 but tablets are going to be "certainly bigger than computers very soon", he added.

Staples saw Q2 sales fall two per cent to $5.3bn (£3.4bn) as a three per cent rise in online revenue was cancelled out by flagging store sales. The giant closed 103 stores – including 49 in Europe – in the 12 months leading up to the quarter but even taking into account store openings and closings, total sales were down one per cent.

European same-store sales slumped by six per cent.

"In Europe, we continue to take cost out of the business by reducing headcount and streamlining our operations," said chief executive Ronald Sargent.

After posting an 18 per cent slump in earnings per share in Q2, Staples now expects full-year earnings to hit between $1.21 and $1.25 per share, below its previous forecast, something that concerned analysts on the call.

"I am not at all happy with taking down our guidance this morning and I'm very frustrated that we are not seeing the kind of the sales grow as quickly as we'd like," said Sargent.

The retailer also conceded it has yet been unable to capitalise on the impending merger of two of its main rivals, Office Depot and OfficeMax.