Thursday, March 6
Staples has become the second major chain to announce the mass closing of stores this week, providing the latest evidence of how the retail landscape is being remade by shifts in American shopping habits.
The nation's largest office-supply company said Thursday that nearly half of its sales are now generated online, and it is working aggressively to cut costs and become more efficient. It aims to close more than 10 percent of its North American stores by the end of next year, up to 225 stores, as part of a plan to save about $500 million.
Staples Chairman and CEO Ron Sargent said his company's stores have fallen short of expectations over the past three years, and the company launched a plan last year to "fundamentally reinvent" Staples.
"This is essential," he told analysts. "Our customers are using less office supplies, shopping less often in our stores and more online, and the focus on value has made the marketplace even more competitive."
Two days ago, RadioShack, which is fighting to update its image, announced plans to close up to 1,100 stores, about a fifth of its U.S. locations, after its losses widened during a dismal holiday season.
The recession did heavy damage to chains like Staples, and competition from discount stores also hurts. But online sales are affecting brick-and-mortar stores across the retail sector, no matter if the company is selling clothes, books or electronics.
Shoppers are buying online more, and they're also window shopping virtually, so they are making fewer store visits, said Bill Martin, co-founder of ShopperTrak, which tracks data at about 40,000 U.S. stores. He said that's part of the reason the number of stores is contracting even though overall sales are growing, albeit at a slower pace.
"I think it's pretty clear that the consumer is evolving and might be evolving at a little faster pace than retail," he said, noting that shoppers can now use smartphones to compare prices during a store visit.
Staples Inc. has already shuttered dozens of its North American stores in the past year and said it will close up to 225 by the end of 2015. The company would not elaborate on the number of jobs being cut in the latest round of closings, nor the locations of stores that will close. It has 1,846 stores in North America and Canada, the vast majority in the United States.
While it closes stores, Staples is offering more online. It increased the number of products it sells on the website Staples.com five-fold in the past year, from 100,000 to 500,000. Sargent expects to triple that total to 1.5 million by the end of this year.
Despite the rising popularity of online shopping, Martin noted that retailers are still opening new stores in areas of population growth, and Sargent said his company has no plans to give up on physical locations. They believe that customers still want the convenience and service that they can get there.
"That said, stores have to earn the right to stay open," Sargent said. "We are committed to making tough calls when it's necessary."
Those tough calls are being made by many retailers.
In the subcategory of office retail, there is a rapid consolidation taking place, both in physical presence and among one-time rivals. Staples has cut the size of its typical store in half over the past several years. Last fall, with sales flagging, rivals Office Depot and OfficeMax completed a $1.2 billion merger.
Shares of Staples Inc. tumbled Thursday after the company posted disappointing numbers for its most recent quarter and issued a weak forecast while also announcing the store closings.
Staples, based in Framingham, Mass., reported adjusted earnings of $1.16 per share for 2013, well short of the $1.21 to $1.25 per share it forecast as recently as November.
The company earned $212.4 million, or 33 cents per share, in the quarter that ended Feb. 1. Revenue slumped nearly 11 percent to $5.87 billion, partially because the 2012 quarter contained an extra week. Those results also missed Wall Street expectations.
Shares of Staples plunged more than 15 percent, or $2.03, to $11.37 Thursday afternoon.