Credit: Image source: Getty Images.What happened
Shares of office supplies giant ACCO Brands (NYSE: ACCO) crashed hard on Tuesday. Following the release of disappointing third-quarter results and lowered full-year guidance, the stock dived as much as 25.9%. By 3:10 p.m. EDT, ACCO's shares had recovered somewhat to a 19.8% drop.
So what
In the third quarter, ACCO Brands reported earnings of $0.34 per share on $507 million in top-line revenues. That's down from $0.35 and $532 million, respectively, in the year-ago period. Analysts had been looking for a stable year-over-year comparison with earnings near $0.35 per share again and sales in the neighborhood of $533 million.
Image source: Getty Images.
Now what
The company behind familiar brands such as Esselte, Mead, and Swingline had a solid back-to-school season in the U.S., but not good enough to make up for anemic orders from wholesalers serving the professional office-supplies market. The company raised American prices across the board at the start of October to stabilize the top line and protect its profit margins from tariff-based price increases on key materials like imported steel and aluminum. Another round of higher prices will come in 2019.
I suppose these actions will show whether ACCO Brands has enough pricing power to overcome lower sales volumes through richer price tags. Many investors today are betting that the higher prices might drive cost-conscious customers to competing makers of staplers, binders, and pencils. The massive drop in ACCO's own share price comes as no surprise today.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
