Staples has become the latest casualty of a somewhat stinky economy, as the office-supply chain announced it will be closing 225 stores across the US and Canada. Staples is just the latest in a string of retail casualties lately which have announced poor “holy-day” sales, and whose shares have suffered the consequences. Recently, RadioShack announced lower than expected numbers for the close of 2013, along with a plan to severely trim its physical presence and renovate its image. Staples now adds itself to the list of companies affected by poor sales numbers and a floundering economy.
The planned closure of 225 stores, comes as part of a plan announced by Staples to cut its expenditures to the tune of $500 million by the end of 2015. The announcement came on the heels of the fourth straight quarter of losses, as Staples’ fourth quarter, which ended Feb. 1, fell by nearly 10% to $5.9 billion. This, combined with company projections of additional losses in its first quarter, means that the trend of falling sales could extend for a fifth straight quarter. Investors expressed their disappointment which translated into a 16.3% slip in the Staples share price, leaving it hovering at just over $11/share in trading today.
In a similar response to a poor retail season, combined with slipping competitive advantages in within its industry, Staples is also taking a look at cost-cutting action in addition to the store closures. The company will be looking to rearrange itself in order to become more efficient with the resources which remain after its aggressive physical cost cutting is completed.
Staples CEO Ronal Sargent highlighted some of the company specific trends that have hurt the retail giants numbers. Sargent stated that the company’s customers have become much more value-focused, and in an effort to find the best deals many have turned to online retailers to find their desired products. The additional competition brought about by online giants and deep discounters has also contributed to the disappointing trends plaguing Staples.
The news that Staples will be closing 225 stores across the US and Canada is not a complete surprise to those who have been watching the company’s numbers closely. The retailer has been trimming its presence for some time now, both closing stores and reducing the size of its physical stores. Staples has just close to 1,850 locations in the US, and the closures will be a significant reduction in its domestic retail presence.
There are a number of factors which contributed to the poor numbers for Staples, but some of them were beyond the company’s control. In similar fashion as RadioShack and other retailers, Staples analysts credited a particularly harsh winter for detracting from the usual foot traffic. That combined with the industry specific trends of additional online competition, and value-focued shoppers has spelled current and future challenges for Staples.
For now the company has announced that it expects additional losses into the first quarter of this year. In addition to more losses, Staples has decided that it will close 225 physical stores across the US and Canada, and hope that it can turn things around over the upcoming couple of years.
By Daniel Worku