Tuesday, December 16, 2008

Debt Level a Tall Order for Staples

Given slower store traffic and an uncertain global economic environment, did Staples (SPLS-$18.35) pick the wrong time to spend approximately $4.4 billion in connection with the June 30 acquisition of Dutch peer Corporate Express? Borrowings and debt service requirements have increased substantially at the world’s largest office products retailer.

The current level of indebtedness (75 percent of shareholder equity), combined with maturing debt obligations and vulnerability to a prolonged downturn in consumer and business spending, will limit Staples’ ability to borrow additional amounts (for working capital, future acquisitions, and capital spending initiatives) needed to resuscitate growth….
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Editor David J Phillips does not hold a financial interest in any stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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