Staples, the United States’ biggest office supply retailer, announced that by the end of 2015 it will close up to 225 stores in North America to cut annual costs by $500 million. Since nearly half of its sales are generated on the Internet, Staples is planning to expand online to become more efficient.
The Massachusetts based company has been threatened by the recent merger of Office Max and Office Depot. It has also been pressured by the online giant Amazon.com, which not only sells its own inventory, but acts as a price-driven clearing house for countless online retailers. Staples’ fourth quarter sales, which ended February 1, dropped 10.6 percent to $5.9 billion. Profits dropped 28 percent down to $212 million, compared to $308 million a year before. With earnings per share slumping from 46 cents to 33 cents Staples stock fell 15.3 percent Thursday on the NASDAQ to $11.35 a share.
Staples founder Thomas G. Stemberg came up with the idea for an office supply superstore when he couldn’t get a replacement printer ribbon because his local retailer was closed for a holiday weekend. As a grocer, he knew retailing and was sure that he could make office supplies more accessible and affordable. The first Staples opened in Boston in 1986. It was backed by Bain Capital, co-founded by Mitt Romney. The former GOP presidential candidate served on the Staples board of directors for 15 years. Today Staples has 1,871 retail stores in 26 countries with more than 85,000 employees.
Are Staples problems shared by other big box stores?
Best Buy is the world’s largest electronics retailer. Hubert Joly became chief executive officer in September 2012 with the intent of making Best Buy competitive with Amazon.com. Joly slashed prices but revealed that in the nine weeks that ended January 4, in stores that had been opened at least 14 months, sales fell 0.9 percent, while discounts lessened profit margins. Total revenue for the chain over the holidays dropped 2.6 percent to $11.5 billion. Its shares dropped 29 percent the day of the disclosure. The only bright spot for the retailer was that online sales rose 24 percent.
Target used to be popular with bargain hunters, producing a kind of reverse snobbery, with buyers sometimes boasting that they had made their purchases at “Tar-jay.” Target’s massive data breach of the personal information of 110 million people helped lower its last quarter profits by 46 percent. The chain’s chief information officer, Beth Jacob, has been forced out. It’s now closing eight U.S. stores.
Wal-Mart earnings dropped in the fourth quarter of 2013 from $1.67 a share to $1.36, a decline of 19 percent compared to the same quarter a year ago for a profit of profit of $4.4 billion. Online sales topped $10 billion, a 30 percent increase over the year before.
Costco, the largest U.S. warehouse club chain, said Thursday that net income in the quarter that ended on February 16 fell 15 percent to $463 million from $547 million, a year earlier. At the news, Costco shares fell 2.8 percent to $113.26.
Overall, U.S. retail sales fell by 0.4 percent in January following a revised drop of 0.1 percent in December, the biggest decline since June of 2012.
Have any big box retailers been doing well?
The Home Depot, the world’s largest home improvement retailer, reported that comparable U.S. store sales for the fourth quarter of fiscal 2013 increased by 4.9 percent and that sales for fiscal year 2013 were $78.8 billion, an increase of 5.4 percent from fiscal year 2012. “In 2013, we posted our strongest comp sales growth in 14 years as solid execution and the recovering housing market aided our performance,” said Frank Blake, Home Depot chairman & CEO.
The Home Depot promptly announced a 21 percent increase in its quarterly cash dividend to 47 cents per share noting that it has now paid a cash dividend for 108 consecutive quarters.
Meanwhile Amazon.com had its best holiday season ever with profits of $239 million, on revenue of $25.59 billion. For the entire fiscal year Amazon’s sales were up 22 percent. Wall Street, however, did not like the news. Analysts had expected earnings of 66 cents a share instead of the 51 cents per share it saw. Amazon stock had flown as high as $408 a share. Today it closed at $372.16 on the NASDAQ.