Staples to shutter up to 225 stores
Staples to shutter up to 225 stores
By Taryn Luna |
GLOBE CORRESPONDENT MARCH 07,
2014
Cuts are expected to lower the number of Staples stores
in North America by about 12 percent, the company said.
Staples Inc., the big office supply retailer trying to
reinvent itself in the face of intense Internet competition, plans to close up
to 225 stores and slash $500 million in annual costs by the end of next year.
The Framingham company has closed about 40 locations and
shrunk the size of another 40 superstores in the past year. The more aggressive
plans detailed Thursday follow disappointing sales results for the Christmas
period and forecasts for more business declines.
“Now I want to make it clear that we’re not getting out
of the retail business,” Staples chief executive Ron Sargent said in a call
with analysts. “That said, stores have to earn the right to stay open, and we
are committed to making tough calls when it’s necessary.”
The planned cuts will reduce the number of Staples stores
in North America by about 12 percent. There are 75 Staples stores in
Massachusetts. It was unclear how many could be affected by the new plan.
Staples first revealed plans to radically reshape its
business in 2012, reacting to heightened competition and a diminishing demand
for such core products as paper, ink, and toner in the digital age. The company
unveiled a multiyear plan to reduce its retail footprint and emphasize online
and mobile sales.
Staples intended to close some stores and shrink others
while retaining most of the business conducted at those locations with more
robust online sales of its own. But the retail world was changing faster than
Staples itself and the company failed to keep pace with steep declines in sales
and customer traffic in stores.
“Today was one of the first days that they have been more
or less realistic about the environment,” said Oliver Wintermantel, an analyst
with ISI Group. “They are recognizing that the US is overstored and its a
necessary step in the right direction. But they continue to have too many
stores and they aren’t closing fast enough.”
Wintermantel said Staples would be better off closing 500
stores in the next two years before getting out of retail entirely and focusing
on its contract business. He argues that although some stores still make money,
traffic is declining.
“It’s a dying business,” he said.
Competition from online retailers, especially Amazon.com,
has put relentless pressure on Staples and other brick-and-mortar sellers of
office supplies. Still other kinds of retailers with stores of their own — such
as Target Corp. and Costco Wholesale Corp. — have also jumped into the office
supply market.
“Some business is moving online, and there has been
cannibalization in the marketplace because you have competitors who are
broadening out their offerings,” said Scott Tilghman, senior analyst at B.
Riley & Co.
That squeeze helped prompt the recent merger of two
traditional Staples competitors, OfficeMax Inc. and Office Depot Inc. That
merger may actually give Staples a boost because the combined competitors plan
to close many of their own stores.
But the latest business report from Staples was
troubling. Sales at comparable Staples retail stores in North America declined
by 7 percent in the company’s most recent fiscal quarter, measured against
performance during the same period a year earlier.
Overall company sales, which include Internet revenues,
overseas business, and lines selling directly to commercial customers, declined
by 4 percent during the quarter.
Staples, which employs about 80,000 workers worldwide,
still runs a profitable business, earning $212 million from continuing
operations in its latest quarter. But the broad business decline — and the
company’s own reduced forecast for the current quarter — remains troubling to
analysts who follow Staples.
“This continues what seems like a continuous spiral
toward lower and lower results,” wrote Gary Balter of Credit Suisse.
Staples stock fell more than 15 percent Thursday,
dropping $2.05 to $11.35 per share.
“We’re certainly not happy with our fourth quarter
results, but we are making progress as we reposition Staples as the destination
for every product businesses need to succeed,” Sargent told analysts. “Our
customers are using less office supplies, they’re shopping less often in our
stores and more online, and the focus on value has made the marketplace even
more competitive.”
Staples plans to shutter stores as leases end and break other
leases to close underperforming locations. The company is also cutting some of
the largest 24,000 square foot stores in half, creating what they tagged
“omnichannel’’ stores.
The company introduced about 30 of these smaller stores
last year, blending mobile, online, and in-store shopping. The stores, which
operate with fewer products, are stocked with kiosks that connect consumers to
Staples.com to buy items they can’t find on the shelves.
The company said it will also diversity its retail
offerings with more products in categories such as facilities and breakroom
supplies, maintenance items, gifts and cards, and early education toys. The new
products are expected to be in more than 1,000 stores by June.
Tilghman of ISI Group said the addition of more
categories will help Staples offset the decline in office supplies, but it’s
unclear whether the company will succeed in transitioning in-store sales
online.
Taryn Luna can be reached at taryn.luna@globe.com. Follow
her on Twitter @tarynluna.
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