3/07/14

Staples shifts investment to the web

As part of a plan to cut costs by $500 million, Staples says it plans to close up to 225 North American stores by the end of 2015. But on Staples.com, where sales are up amid a drop in total sales, the company grew its number of products as of the end of 2013 to 500,000 from 100,000 a year earlier.

Paul Demery , Managing Editor, B2B E-commerce

Staples Inc. is shifting its investment priorities, recognizing that more of its sales are coming from its e-commerce sites and less from its bricks-and-mortar stores.

The office supplies retailer announced a plan yesterday to close up to 225, or about 12% of its more than 1,800 North American stores, by the end of next year. On Staples.com, meanwhile, the company grew its number of products fivefold as of the end of last year, it said Thursday.

For the fourth quarter ended Feb. 1, 2014, Staples, No. 2 in the Internet Retailer Top 500, said sales on Staples.com (including only North American sales, on Staples.com in the United States and Staples.ca in Canada) inched up 1.4% to $614.07 million, as total company sales fell 11% year over year, to $5.87 billion. Those results were based on 53 weeks in the year ended Feb. 1, 2013, compared with 52 weeks in the most recent fiscal year. Taking out the extra week in the prior year, Staples said sales on Staples.com rose 10.4% in Q4, as total sales fell 3.8%.

For the full fiscal year, North American sales for Staples.com totaled $2.2 billion, a spokesman says. He declines to give a year-over-year percentage change, but notes that sales grew 4% through the first three quarters. The company's total e-commerce sales in 2013, he adds, were $10.4 billion, up about 1% from $10.3 billion in 2012. The company's total e-commerce sales include more than 22 international e-commerce sites and the North American business-to-business sites StaplesAdvantage.com and Quill.com.

To further bolster sales on its fast-growing web channel, Staples said it ended its recent fiscal year with 500,000 products available on Staples.com, up from 100,000 a year earlier. At the same time, it eliminated more than one million square feet of store space in North America through the net reduction of 40 in the number of stores, with another 40 stores either downsized or relocated to more efficient space.

“A year ago, we announced a plan to fundamentally reinvent our company,” chairman and CEO Ron Sargent says. “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.”

Staples is also responding to a decline in demand for many of its core items—such as paper, pens and printer ink—as more businesses and consumers communicate via e-mail and exchanging information in digital format. Office supplies sales in the U.S. declined 1.7% from 2003 to 2012, according to U.S. Commerce Department data, even without taking inflation into account.

In response, the company, which operates about 1,500 stores in the United States and another 300 in Canada, is expanding the range of merchandise available in stores, where it also is installing updated kiosks for shopping on Staples.com. This month, it started introducing about 1,600 items for business customers in eight categories other than office supplies: facilities and breakroom supplies; products for maintenance, repair and operations; mailing and shipping equipment; supplies for small retailers; storage equipment; gifts and cards for office parties; notepads and other organizational materials under the Poppin brand; and toys and learning aids for early education.

For the fourth fiscal quarter ended Feb. 1, Staples also reported:

● Income from continuing operations grew 135.6% year over year to $212 million from $90 million, as total sales fell 10.6% to $5.87 billion from $6.57 billion;

● For its North American stores and online operations, combined sales were $2.90 billion, down 12.1% from $3.30 billion a year earlier. Excluding the 53rd week in the prior year, sales fell. 5.7%. Comparable-store sales were down 7%;

● Operating income for its North American stores and online operations was $176 million, down 44.8% from $317 million.

For the fiscal year ended Feb. 1, 2014, Staples didn’t break out sales for Staples.com, but reported:

● Income from continuing operations of $707 million, compared with a year-earlier net loss of $161 million, as total sales of $23.11 billion fell 5.2% from $24.38 billion a year earlier;

● For its North American stores and online operations, combined sales were $11.10 billion, down 6.1% from $11.83 billion a year earlier. Excluding the 53rd week in the prior year, sales fell. 4.3%. Comparable-store sales were down 4%.

● Operating income for its North American stores and online was $733 million, down 25.7% from $987 million.

Topics:

2013 earnings, online office supplies, Ron Sargent, shift to e-commerce, Staples, Staples earnings, Staples Q4 2013 earnings, Staples.com, store closings, Top 500

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