SPLS Staples, Inc.

Thomas Stemberg's first big break came when he lost his job in the grocery store business, a setback that led him to develop one of the country's first specialized superstores years before they dotted the retail landscape.

Mr. Stemberg, the only son of Austrian immigrants, had climbed the ranks of the cutthroat New England grocery business by pushing then-new concepts like generic store-brand food. But he was no stranger to corporate infighting and left the industry in 1985 after an argument with bosses got him fired.

The early dismissal led Mr. Stemberg to start Staples Inc., a concept he grew from a single location off a turnpike in Boston in 1986 into an international chain with billions of dollars in annual sales.

"He didn't play well with other children," said former Massachusetts Gov. Mitt Romney, an early Staples investor. Still, his former employers acknowledged the young executive "was brilliant and he was driven."

Mr. Stemberg died Friday at his home in Chestnut Hill, Mass., after a two-year fight with gastric cancer. He was 66.

The combative retail executive often said he hatched the idea for Staples after driving around the Boston area searching in vain for printer ribbon on the Fourth of July weekend, when local stationary shops were closed.

"He understood those mom-and-pop stores could probably be fine just from 9 to 5" by charging huge markups, said Larry DiCara, a longtime friend and partner at the law firm Nixon Peabody LLP.

Mr. Stemberg said customers would flock to an outlet with more convenient hours and cheaper prices. A bigger store, he reasoned, could squeeze better deals out of wholesalers.

The idea won over Leo Kahn, a former nemesis in the grocery industry who had bonded with his younger rival over Harvard basketball games. The two teamed up and pitched the plan to investors. Mr. Kahn gave the startup credibility in the financial markets while Mr. Stemberg worked on the store's strategy and day-to-day operations. Mr. Kahn died in 2011.

When most shopping was still done in malls and on Main Street, Staples' approach to pens, pads and printer ink helped usher in a new era of big-box stores set up to squeeze the competition with more selection and lower expenses. The chain eventually grew into the world's leading office supplier with more than $22 billion in sales in its last fiscal year.

A stickler for efficiency, Mr. Stemberg was seen stocking some of the first store's shelves the day it opened and would often enlist his children to scout out competitors' stores in the company's early days. "We'd be standing outside counting how many people were coming in," said Rylan Hamilton, his adopted son.

Mr. Stemberg later became a trustee at the Boston Symphony Orchestra and created two annual scholarships for incoming Harvard University students who like him had lost a parent. After his father died when he was 11, Mr. Stemberg moved with his mother to Vienna. He returned to the U.S. because he was accepted to Harvard, where he also earned an M.B.A.

Mr. Stemberg kept running Staples as it opened more stores, built its own distribution centers and launched its initial public offering in 1989. The company became a windfall for its founders, including Mr. Romney's Bain Capital. Mr. Stemberg stepped down as chief executive in 2002 and stayed on as executive chairman until 2005.

After leaving Staples, he also helped convince Mr. Romney during his early days as Massachusetts governor to push for universal health care in the state, arguing the cost of treating uninsured workers was burdening society. The laws eventually passed in Massachusetts became the model for the federal Affordable Care Act.

"I don't like exactly the way Obamacare was structured, but it copied a lot of what we did in Massachusetts," Mr. Romney said. "Had Tom not put that in my mind," he added, many more people wouldn't have health care today.

After Staples, Mr. Stemberg joined venture-capital firm Highland Capital Partners and was an early investor in apparel store Lululemon Athletica Inc. He is survived by his third wife, Katherine, and by six sons, three stepdaughters and three grandchildren.

The simple economics of Staples' lower expenses and broader selection eventually swept away most independent stationers in much the same way supermarkets had trumped independent grocers decades earlier.

Staples' in-store sales started to fall behind other retailers during the 2008 financial crisis and have yet to recover. In February, Staples revealed plans to buy rival Office Depot Inc. for $6.3 billion, a response to the office supply market's changing economics.

The two chains first tried to merge in 1996—with Mr. Stemberg at the helm of Staples—but were rebuffed by the Federal Trade Commission, which warned the deal could raise prices. The new takeover is still under review in the U.S., Canada and Europe.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

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(END) Dow Jones Newswires

October 23, 2015 15:05 ET (19:05 GMT)

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