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Staples (SPLS) Stumbles… Again

21 May 2014 by HCM

During the first 4 months of the 2014, the 5 year risk premium of SPLS (Staples, Inc.) was on a steady path wider following a poor reporting season with regard to Q4 2013. Generally speaking, it was doom and gloom among most of the retailers and they have been one of the sectors which slowed the tightening of US credit indices. Then, as the tide eventually lifts all boats, the 5 year CDS of SPLS recovered during the good run of the CDXIG, the US investment grade credit index, which begun mid april. But yesterday reality struck back with the release of yet another disappointing set of results. Earnings missed analysts’ consensus and sales were guided down for the remaining of the year. 5 year CDS added 20bps of the news, and it looks as if it could test the recent wides of 270bps. If it breaks that level, it will be a leap into the unknown, with some analysts considering a 600bps 5 year risk premium a distinct possibility.