Office supply woes deepen as Newell warns on fourth quarter

By Karen Jacobs

ATLANTA (Reuters) - The office retailing sector received another blow on Monday when supplier Newell Rubbermaid Inc (NWL.N) warned that the remainder of this year would be weaker than expected, sending its stocks lower.

Newell Rubbermaid cut its fourth-quarter and full-year sales forecasts, citing the softness in office products that has pinched some retailers.

The maker of Paper Mate and Sharpie pens and markers, Rolodex organizers and DYMO printing products said it was on track to meet its earnings forecast.

But it said sales in the fourth quarter would be "essentially flat" compared with a year earlier as office products retailers reduce inventory, while full-year sales are now expected to rise 3 percent to 3.5 percent.

Newell Rubbermaid had previously forecast sales would rise 2 percent in the quarter and 4 percent for the year.

"While this inventory correction by North American office retailers poses a near-term challenge, we remain confident in our ability to drive long-term sales growth," Chief Executive Mark Ketchum said in a statement.

Office supply chains have seen a slowdown in retail sales in recent quarters as job growth slowed and the weak U.S. housing sector and credit market jitters led small businesses to cut spending, said Jefferies & Co. analyst Dan Binder.

"The actual office products players seem to be faring even worse than perhaps the vendors because they are battling it out on market share," said Binder, who follows Office Depot Inc (ODP.N) and Staples Inc (SPLS.O)

RETAIL WEAKNESS

Last week, Office Depot reported a lower-than-expected third-period profit as sales at stores open at least a year fell and promotions hurt margins.

Earlier this month, Dutch office goods supplier Corporate Express NV CXP.AS said quarterly operating profit fell 31 percent, hit by lower U.S. sales.

Office Depot said its results were hurt by a competitive back-to-school season among other factors and has also commented that small business customers have curbed purchases.

"With credit drying up and housing collapsing, you probably have some tie-in with small business spending," said Binder.

He added that industrial production had also slowed versus last year, another factor likely affecting office supplies.

OfficeMax Inc (OMX.N), another retailer, reported higher third-quarter profit in early November, but cited same-store sales declines in core office supplies and furniture.