Staples Swings To Loss, to Close 50 Stores This Year
August 17 2016 - 7:40AM
Dow Jones News
Staples Inc. said it swung to a loss in the latest period on
nearly $1 billion in charges, hurt in part by its failed plan to
merge with Office Depot Inc.
The charges were primarily related to the impairment of European
goodwill and other assets, as well as costs associated with the
termination of the Office Depot merger agreement. Staples paid
smaller rival Office Depot a $250 million breakup fee. Excluding
such items, earnings met the company's forecast for the
quarter.
Staples' results have been hurt recently amid a declining market
as an increasingly digital workplace continues to dent sales. Sales
at existing stores fell 5% in the quarter, below the 3.1% decline
analysts polled by Consensus Metrix expected. Comparable sales,
which includes stores and Staples.com but excludes currency
impacts, declined 4%.
In February 2015, Staples agreed to buy Office Depot for about
$6.3 billion. The U.S. Federal Trade Commission argued the tie-up
would mean higher prices and fewer options for big companies that
buy office supplies in bulk. After a federal judge in May blocked
the retailer's attempt to acquire Office Depot, longtime Staples
leader Ron Sargent agreed to resign as chief executive.
Interim Chief Executive Shira Goodman said the company was
"dramatically changing our mind-set and operating model" to
reposition the company. In North America, the company closed five
stores during the quarter amid its continuing plan to close about
50 North American stores this year.
For the current quarter, Staples expects adjusted earnings of 32
cents to 35 cents a share. Analysts, polled by Thomson Reuters,
anticipated 35 cents a share.
In all for the July quarter, Staples posted a loss of $766
million, or $1.18 a share, compared with a year-earlier's profit of
$36 million, or 6 cents a share. Excluding items, earnings were
flat at 12 cents a share, in line with the company's guidance for
earnings between 11 cents and 13 cents.
Revenue slipped 4% to $4.75 billion. Excluding the impact of
store closures, foreign exchange effects and the sale of Staples
print solutions, the company said revenue slipped 2%. Analysts
projected revenue of $4.77 billion.
Earlier this month, Office Depot said it swung to a profit in
the latest period, helped in large part by the $250 million breakup
fee it had received from Staples. The earnings result, excluding
the one-time fee and other special items, declined from a year ago
and missed Wall Street expectations. The company also said it would
close an additional 300 stores.
Shares of Staples were inactive in premarket trading.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
August 17, 2016 07:25 ET (11:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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