Staples Bleeds Red, Will Board Up 225 Stores By 2015
Staples (NASDAQ:SPLS) released its fourth-quarter earnings Thursday and reported some significant news: it will board up 225 stores in North America by 2015. Staples’s announcement isn’t entirely surprising, considering the Framingham, Massachusetts-based company has been suffering slowing sales as of late thanks to consumers visiting e-retailers and mass market chains to satisfy their office supply needs. However, the shut down figure is still steep, and represents up to 12 percent of Staples’s 1,846 stores in the U.S. and Canada.
According to Reuters, Staples said Thursday that it expects sales to continue declining in its current quarter, and that’s after the company’s sales dropped 10.6 percent to $5.87 billion in the quarter that ended February 1. That reflects Staples’s fourth straight quarter of decline. Same-store sales in North America also fell 7 percent, while net income from continuing operations rose to $212 million, or 33 cents per share, from $90 million, or 14 cents per share, in the year-ago quarter. Shares of Staples sat down 15.07 percent at $11.38 after its earnings release Thursday, but sat up 1.31 percent at $11.63, as the close of trading the following Monday.
It is significant that Staples’s results continue to disappoint, because the company is the largest U.S. office supplies retailer, and its current financial situation evidences the reality that traditional retailers are simply not realizing the success they once enjoyed on account of customers no longer coming into brick-and-mortar stores to buy office supplies when they can easily order them online, or grab them when they are at other mass merchants like Wal-Mart Stores (NYSE:WMT) or Target (NYSE:TGT). Staples’s biggest rival Office Depot (NYSE:ODP) is also in the red, and Reuters reports that the company said last week that it expected sales to continue falling in 2014 after it reported its own respective quarterly loss.
Now, Staples is being forced to adapt its business to have a greater focus on business technologies, breakroom supplies, and copy and print services like paper and toner, according to Reuters. The company is also working to fortify its online offerings, hoping that if shoppers want to shop online, they’ll do it at Staples.com, rather than e-commerce giants like Amazon (NASDAQ:AMZN). According to Tech Crunch, Staples now sells 500,000 products online, compared to 100,000 a year earlier. Last year, it also acquired Runa, a specialist in e-commerce personalisation technology, to help it improve its customers’ experience online.
Now, it is clear that Staples will need to put even greater of a focus on its online services, now that it is closing many of its brick-and-mortar stores. Chief Executive Ronald Sargent evidenced a recognition during his post-earnings call last week that Staples needs to have more of an online presence if it wants to sustain its business, and he maintained Thursday, “Our customers are using less office supplies, they’re shopping less often in our stores and more online, and their focus on value has made the marketplace even more competitive.”
In going along with its new plan to focus on technology and the items it can offer customers, Tech Crunch reports that Staples now sells devices such as 3D printers and other gadgets, and it also has developed its own Staples Connect hub as part of a partnership with smart home tech company, Zonoff. This device lets consumers connect “smart” products in their home and control them via one convenient app.
Staples executives hope that the company’s new tech products, its online presence, and its aforementioned store closings will help it offset the bleeding it has suffered in recent quarters. The company is also sticking to a multi-year reduction plan that Reuters highlighted Thursday that executives hope will generate annualized pretax cost savings of about $500 million by 2015. Those savings, coupled with the ones Staples will realize from the store cuts, is what the company is now concentrating on to keep its head above water.