Market Overview

Staples Will Close 15 US Stores; Will Restructure International Operations

Staples (NASDAQ: SPLS) the world's largest office products company and second largest internet retailer, today announced that it is embarking on a strategic plan to better serve the needs of its customers and accelerate growth.Staples (Nasdaq: SPLS) the world's largest office products company and second largest internet retailer, today announced that it is embarking on a strategic plan to better serve the needs of its customers and accelerate growth. Staples will integrate its retail and online offering, increase investment in its online businesses, reorganize its operations, implement leadership changes, initiate a multi-year cost savings plan, and restructure its International Operations.

“Our vision is to establish Staples as the single-source product authority for millions of businesses,” said Ron Sargent, Staples' chairman and chief executive officer. “We are building on the strengths that are the foundation of our success by focusing on five key priorities: accelerate growth in our online businesses; fully integrate retail and online; improve retail store productivity; restructure our International Operations; and return cash to stakeholders.”

This strategy builds on Staples' unique strengths, including its world-class supply chain capabilities, extensive retail store network, strong relationships with business customers of all sizes, and industry-leading online presence.

Accelerate Growth

To achieve its vision, Staples is increasing investment in online and mobile capabilities to provide business customers with a differentiated multi-channel shopping experience. Building on its success in categories like facilities and breakroom supplies, copy and print, and technology products, Staples is significantly expanding its assortment beyond office supplies to better serve the needs of business customers. To help fund these investments in growth, Staples is initiating a multi-year cost savings plan which is expected to generate annualized pre-tax cost savings of approximately $250 million by the end of fiscal year 2015.

Enhance Multi-Channel Offering

To support growth and better address the changing needs of its customers, Staples announced the combination of its U.S. Retail and Staples.com businesses under the leadership of Demos Parneros. Joe Doody will continue to lead Staples' North American Contract and Quill.com businesses, and will assume leadership of supply chain and customer service operations in North America. “Demos and Joe are outstanding leaders who have a deep understanding of the needs of business customers,” said Sargent. “By realigning our organization around our customers, we are much better positioned to take advantage of our unique supply chain and retail store assets, while accelerating online growth and significantly improving productivity.” Demos Parneros and Joe Doody will continue to report to Ron Sargent.

Improve Retail Store Productivity

Staples plans to reduce retail square footage in North America by approximately 15 percent by the end of fiscal year 2015. As part of this plan, Staples is accelerating the closure of approximately 15 U.S. stores which will result in a pre-tax cash charge of approximately $35 million during the fourth quarter of 2012. Staples now expects a total of approximately 30 net store closures and 30 store downsizings and relocations in North America during fiscal year 2012.

Restructure International Operations

Staples announced key restructuring activities as part of an ongoing process to reduce the complexity and improve the profitability of its European operations. Staples plans to close 45 stores and several sub-scale delivery businesses in Europe by the end of fiscal year 2012, and also announced a leadership change in its European operations. Staples announced the appointment of John Wilson as president of Staples Europe. “John has a strong knowledge of our industry and a proven track record of improving performance which uniquely positions him to lead our European organization,” said Sargent. John will be based in Amsterdam and replace Rob Vale, who is retiring as planned after leading Staples' European operations over the past three years.

As a result of these actions, Staples expects to record pre-tax cash charges in the range of $145 million to $195 million by the end of fiscal year 2012. Additionally, Staples expects to record a pre-tax non-cash charge in the range of $790 million to $850 million for the impairment of goodwill and other assets within its European retail and catalog businesses during the third quarter of 2012. Staples is continuing to explore additional operational and strategic opportunities for its European operations.

Staples is also pursuing the sale of its European Printing Systems business. As a result, this business will be reported as discontinued operations as of the third quarter of 2012. Staples expects to record a pre-tax cash charge in the range of $15 million to $20 million related to this action during the third quarter of 2012.

Staples is rebranding its Australian business as it continues to move toward one global brand. As a result, Staples plans to record a $20 million pre-tax non-cash charge related to accelerated tradename amortization by the end of fiscal year 2012.

Posted-In: News Guidance

 

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