Out of the Gate: Office Depot shares plunge

Shares plunged $3.05, or 29.3 percent, to $7.36 after falling as low as $7.29, a trade not seen since 2000.

Early Tuesday, the Delray Beach, Fla., company said the weak economy has hurt second-quarter sales. It said same-store sales--or sales at stores open at least a year--will come in 10 percent below the year-ago quarter.

The company also said its margin for earnings before interest and taxes declined more than expected, and predicted the economic environment to be "difficult" for the rest of the year. However, the company said profit margins will improve sequentially in the third and fourth quarters.

In a note to investors, Deutsche Bank's Mike Baker called the weaker margins a "significant" development. He said the new outlook implies the company will post break-even earnings-per-share for the second quarter.

Baker reiterated his "Hold" rating on the company, and predicted shares of competitors OfficeMax Inc. and Staples Inc. would also trade down on the news. He called Staples his "favored name" in the group.

Staples shares fell 76 cents, or 3.3 percent, to $22.38.

Office Depot is scheduled to release earnings for the quarter ended June 28 on July 30. Analysts surveyed by Thomson Financial expect profit of 21 cents per share on revenue of $3.64 billion.