Staples gives new meaning to momentum

Same stores sales declined again at Staples North American retail stores in the third quarter, but chairman and CEO Ron Sargent contends the company is gaining momentum on a reinvention strategy.



Sargent is being generous with his usage of the word momentum to describe the performance of the nation’s leading office supplies retailer. The third quarter revealed persistent weakness in retail operations and the international business offset by modest growth in the commercial business.



Total company sales declined 2.5% to $5.96 billion during the third quarter ended Nov. 1, but sales were said to have increased 0.5 if the impact of 127 North American store closures and foreign exchange rates are excluded. Fourth quarter sales are also forecast to decline.



Profits declined to $217 million, or 34 cents a share, from $220 million, or 34 cents a share, during the third quarter the prior year. Profits on an adjusted basis to exclude restructuring and other non-recurring gains and expenses, increased to $236 million, or 37 cents a share.



"We're building momentum as we reinvent Staples," Sargent said. “During the third quarter, we accelerated growth in our delivery businesses, gained traction in categories beyond office supplies, and changed the way we work to drive cost savings."



Among the positives the company cited during its third quarter were sales growth at the North American Commercial division, Staples.com growth of 9% and high single digit same store sales growth of the copy and print business in North American stores.



Overall however, the North American retail business remains challenged with sales that declined 5.9% to slightly more than $2.8 billion and same store sales that declined 4%. Operating profits fell to $218 million from $285 million. According to the company, sales declines in business machines and technology accessories, computers, and technology services, were partially offset by growth in mobility, cleaning and breakroom supplies, paper, and copy and print services.



An area where some momentum was evident was the company’s North American Commercial division. Sales increased 3.3% to nearly $2.2 billion and operating income was flat at $159 million. The top line growth was driven by facilities and breakroom supplies, furniture, print solutions, business machines and technology accessories, and core office supplies, partially offset by sales declines in ink, toner and paper. Operating incomes was flat because Staples spent more on incentive compensation, sales force investments and reduced prices.



Sales at Staples international division declined 1% on a constant currency basis to $970 million while operating income increased to $6 million from $2 million.