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Staples: Guilty By Association?

Two major chains in this business both announced financials this week, and some online “pundits” have lumped them together, with their futures being described as precarious at best. 3/06/2014 06:46:00 AM

Two major chains in this business both announced financials this week, and some online “pundits” have lumped them together, with their futures being described as precarious at best.

On the one hand, we have RadioShack, which reported quarterly and full-year losses, announced it would close up to 1,100 stores, and has had problems with branding, merchandising and online sales, among others, over the past decade.

On the other hand, you have Staples, which just reported profits for the fiscal fourth quarter and year and announced it would close 225 stores in North America by 2015. While the chain’s sales were down, it said more than half of its volume now comes from online sales.

RadioShack’s stock deserves the hit it has taken this week, given its longstanding problems, but Staples didn’t.  I think Staples took a hit because it had the misfortune of reporting the same week as RadioShack. Its stock is down today and its reputation is taking a drubbing from financial pundits.

Most analysts are stating the obvious — Amazon and other online retailers are hurting both chains.

Sure, Staples never needed to have as many stores as it does in North America, and warehouse clubs are now tough competitors, but the office-supply chain has done something analysts have been howling at all brick-and-mortar retailers to do: Sell more online. I’m sure Best Buy’s Hubert Joly would love to have the kind of online performance Staples has.

Staples is also being lumped in with the other national office supply chain, the newly-merged Office Depot, which reported last week a net loss for its fourth quarter and year.  

Understanding the arcane world of retailing has always been difficult, especially in recent years and especially when it has anything to do with CE. So knee-jerk reactions saying online sales will kill Staples as well as other traditional retailers is understandable.

But in this case, to lump Staples in with other retailers that have serious problems over and above industry trends is just not accurate.

In my view, RadioShack has a good team in place, but will it have the time to make the radical changes needed for the company to survive? Office Depot is in the process of merging operations, something it will have to do quickly to rebound, if not survive.

As for other retail chains that have been beaten up over the past couple of years — Sears and J.C. Penney — both have had structural and management problems that in many cases have been self-inflicted and they would be in trouble whether it was 2014 or 1994.

Staples is remaking and restructuring itself, like Best Buy. And the process is never pretty, but you can see progress.

So let’s see how the rest of the year or so goes before we project when there will be “going out of business” signs at all Staples locations and online.

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