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Staples Profitable, But Will Shut Some Stores

Framingham, Mass. — Staples, in a financial report showing higher profits for its fiscal fourth quarter, said it will close up to 225 stores by 2015 as more than half its sales are now generated online. 3/06/2014 04:43:00 AM Eastern

Framingham, Mass. — Staples, in a financial report showing higher profits for its fiscal fourth quarter, said it will close up to 225 stores in North America by 2015 as more than half its sales are now generated online.

In a statement, Staples said it would shut the stores as part of a $500 million cost-reduction program, but it explained Staples.com sales grew 10 percent in the fourth quarter. When the year ended more than 500,000 products were available on Staples.com vs. 100,000 at the beginning of the year.

The office-supply chain also reported that last year it eliminated more than 1 million square feet in North American stores through 40 net store closures and 40 downsizes and relocations. At the end of 2013 Staples ended the year with 1,846 stores in North America.

Ron Sargent, Staples’ chairman/CEO, did not provide details in the statement, except to say, “A year ago, we announced a plan to fundamentally reinvent our company. 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.”

Its financial reports for the quarter and the fiscal year, ended Feb. 1, showed total company sales for the quarter and the year were down, but Staples recorded a profit in both time periods.

In the fourth quarter of 2013, total company sales, ended Feb. 1, were $5.9 billion. Excluding $461 million of sales recorded during the 53rd week in fiscal year 2012, total company sales decreased 4 percent year on year.

Staples reported fourth-quarter income from continuing operations of $212 million, compared with $90 million achieved in prior year’s fourth quarter.

For the fiscal year, total company sales were $23.1 billion. Excluding the extra week in 2012, a 1 percent negative impact due to store closures, and a 1 percent negative impact due to changes in foreign exchange rates, full-year 2013 total company sales decreased approximately 2 percent vs. the prior year.

Staples reported full-year 2013 income from continuing operations of $707 million, compared with a loss of $161 million for the prior year.

In its North American stores and online in the fourth quarter Staples reported 12 percent lower sales year on year to $2.9 billion. Excluding the extra week in 2012, sales were down 6 percent.

Sales growth was negatively impacted by approximately 1 percent due to 63 store closures during the 12 months preceding the fourth quarter of 2013.

 Comp-store sales, which exclude sales in Staples.com, decreased 7 percent, reflecting a 6 percent decline in traffic and a 1 percent decline in average order size vs. the prior year.

Staples.com sales grew 10 percent during the quarter, after excluding the impact of the extra week in 2012 and changes in foreign exchange rates. This reflects increased customer traffic and improved customer conversion.

Operating income fell $141 million during the quarter to $176 million. The decline primarily reflects lower product margins in Staples.com, an unfavorable comparison to the highly profitable extra week last year, the negative impact of fixed costs on lower sales, and increased costs related to growth initiatives in Staples.com, the retailer said.

During the fourth quarter of 2013, the company closed 10 stores and opened one store in the U.S. and closed two stores in Canada.

For the full year, North American stores’ and online sales were $11.1 billion, a decrease of 6.1 percent compared with the prior year. Excluding the extra week of sales in 2012, a 1 percent negative impact due to store closures, and a 1 percent negative impact due to changes in foreign exchange rates, full-year 2013 sales decreased approximately 3 percent compared with the previous year.

Full year operating income was $733 million, down $254 million from the prior year.