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Staples to Shut 225 Stores to Trim $500 Million in Costs

By Cotten Timberlake
March 06, 2014 4:20 PM EST 184 Comments
The company reported fourth quarter income from continuing operations of $212 million, or 33 cents per share, compared to $90 million, or 14 cents per share, a year earlier.
Photographer: Tim Boyle/Bloomberg
The company reported fourth quarter income from continuing operations of $212 million, or 33 cents per share, compared to $90 million, or 14 cents per share, a year earlier.

Staples Inc. (SPLS), the largest U.S. office-supplies chain, will close as many as 12 percent of its North American stores and cut as much as $500 million in costs as online competition continues to hurt sales. The shares fell.

The annual pretax savings, which the company expects to achieve by the end of 2015, will come from areas including the supply chain, sales force, marketing and information-technology services, in addition to the store closings, the Framingham, Massachusetts-based company said in a statement today.

The retailer is facing increased threats from Internet-based rivals such as Amazon.com Inc., a challenge that spurred Office Depot Inc. to merge with OfficeMax Inc. last year. Staples said sales in its fiscal first quarter will fall from a year earlier, the fifth straight quarterly decline, and profit will be as much as 22 cents a share, trailing analysts’ 27-cent average estimate.

Staples’ sales slowdown “reflects both tough industry conditions and underperformance” by the chain, Denise Chai, an analyst with Bank of America Corp. in New York, wrote in a note to clients today. She has the equivalent of a sell rating on the shares.

The shares fell 15 percent to $11.35 at the close in New York for the biggest one-day decline since May 18, 2011. The stock has slid 29 percent this year, compared with a 1.6 percent gain for the Standard & Poor’s 500 Index.

Store Closings

Staples shuttered 42 stores in North America last year, ending 2013 with 1,846 in the region. The plan announced today calls for as many as 225 closings. Kirk Saville, a spokesman for Staples, didn’t immediately respond to voice mails and an e-mail seeking comment on how many jobs will be eliminated by the cost-cutting plan.

“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,” Chief Executive Officer Ron Sargent said in the statement.

Fourth-quarter sales at stores open at least a year fell 7 percent, while sales from Staples.com gained 10 percent, the company said today.

Staples joins a broad swath of retailers shutting stores amid sluggish U.S. sales. Kids-clothes seller Children’s Place Retail Stores Inc. (PLCE) said today it would close 125 stores through 2016, including 41 locations it shut last year, while forecasting profit this year that trailed analysts’ estimates.

Electronics retailer RadioShack Corp. (RSH) said March 4 that it planned to close about a fifth of its stores after fourth-quarter sales trailed estimates.

Staples’ fourth-quarter net income more than doubled to $212.4 million, or 33 cents a share, from $78.1 million, or 12 cents, a year earlier.

To contact the reporter on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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