Staples Store Closures, Online transactions now account for nearly half of office supply giant Staples’ sales, and the company plans to close about 225 stores in response. Staples is snaring a healthy share of online sales, but must trim its base of stores accordingly. A similar dynamic has partly contributed to recent store closings by retailers such as RadioShack.
Staples said Thursday it will close 225 stores in North America by the end of 2015 amid falling fourth-quarter revenue as sales increasingly shift online.
The stock closed down $2.05, or 15.3%, to $11.35.
The company generates nearly half it sales online, says Staples CEO Ron Sargent said.
For the fourth quarter ended Feb. 1, total sales fell 10.6% to $5.9 billion a year ago, the nation’s No. 1 office supply chain said. Earnings were $212 million, or 33 cents per share, compared with $78 million, or 14 cents a share in a year-ago period that included one-time charges. Analysts expected net income of 39 cents a share in the fourth quarter.
The company said it expects per-share earnings in the current quarter of 17 cents to 22 cents, below analysts’ estimates of 27 cents and the 26 cents it earned in the first quarter of 2013.
The store closings will affect about 12% of the company’s 1,846 North American outlets and are part of a plan to save $500 million in costs by the end of next year.
Staples is snaring a healthy share of online sales, but must trim its base of stores accordingly, says analyst Scott Tilghman of B. Riley & Co. A similar dynamic has partly contributed to recent store closings by retailers such as RadioShack, J.C. Penney, Sears and others. About 6% of all retail sales are online; that’s expected to grow to 10% in three to five years, according to Tilghman and the Commerce Department.
Specialty stores such as Staples are also facing increased competition from department stores such as Walmart and Target, pressuring profits, Tilghman says.
Staples also has been hobbled by technological shifts at the office and home, which have reduced the need for bread-and-butter Staples products such as paper, ink and toner, as well as the store’s legacy services.
“You don’t have people faxing stuff, and you don’t have people making huge copies,” says Brian Yarbrough, a research analyst with Edward Jones.
The company is responding with increased emphasis on tech products such as tablets, which may drive traffic but are lower-margin, and open Staples to more competition, Yarbrough says.
Staples is also expanding to offer new product lines for businesses, including industrial and medical supplies.
“We think they’re taking the right steps,” Tilghman says.