By Michael Calia
Staples Inc. said it plans to close 225 stores in North America
by the end of 2015, as part of an effort to save $500 million in
costs, an acknowledgment that much of the market for office
supplies has shifted online.
Shares fell more than 14% in early trading as results for the
company's fiscal fourth quarter and its outlook for the current
period fell below Wall Street projections.
"With nearly half of our sales generated online today, we're
meeting the changing needs of business customers and taking
aggressive action to reduce costs and improve efficiency," Chairman
and Chief Executive Ron Sargent said.
Staples, the largest office-supplies chain in the U.S., said it
is looking to generate annualized savings of $500 million by the
end of 2015, with cuts coming throughout the company, from the
supply chain to "labor optimization."
Staples is the latest big-name specialty retailer to announce a
spate of store closures to adapt to a changing marketplace. Earlier
this week, RadioShack Corp. said it would close up to 1,100 stores,
about a fifth of its total, as the gadget seller posted a big drop
in sales over the holiday season.
Staples and its rivals have faced tough competition from online
stores, such as Amazon.com Inc., along with changes in office
technology that have strained sales. Last month, Office Depot Inc.
said it expected sales to decline this year even after its November
merger with OfficeMax Inc., a move aimed at reducing the saturation
in the office-supplies market.
Staples--which has 1,800 stores in North America, according to
its website--didn't completely wave a white flag over its retail
operations, however. The company Thursday unveiled a plan to add
eight new categories to its stores in a bid to attract more sales
from small businesses.
The product expansion, scheduled to begin later this month, will
include 1,600 new items, while the company will remove about 1,000
items. The new categories include facilities and breakroom
supplies, maintenance repair and operations items, retail supplies
for small businesses, among other things, Staples said.
For the period ended Feb. 1, Staples posted earnings of $212.3
million, or 33 cents a share, compared with a profit of $78.1
million, or 14 cents a share, in the prior-year period. Excluding
debt extinguishment and the termination of a joint venture in
India, Staples posted 46 cents a share in earnings in the year-ago
period.
Sales fell 11% to $5.87 billion. Excluding the prior-year
quarter's benefit of an additional week, sales fell 3.8%.
Analysts surveyed by Thomson Reuters had expected earnings of 39
cents a share and revenue of $5.98 billion.
The retailer continued to feel the strain of lower same-store
sales. North American same-store sales--which exclude Staples.com
sales--fell 7% because of a 6% drop in traffic and a 1% decline in
average order size compared with the year-ago period. Sales at
European stores that were open more than a year declined 1%.
Looking ahead, Staples said it expects sales to decline in the
current quarter and sees per-share earnings between 17 cents and 22
cents. Analysts had expected 27 cents a share on a 1% drop in
revenue.
Write to Michael Calia at michael.calia@wsj.com
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