Market Overview

Highlights from Staples' Q4 Earnings Conference Call

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Below is a summary of some of the highlights from Staples' (NASDAQ: SPLS) fourth-quarter earnings conference call:

  • Excluding the extra week and the negative impact of the stores closed in the 12 months before Q4 of this year and the stronger U.S. dollar, total company sales were down about 2% year-over-year.

  • Didn't improve retail store productivity and also saw weaker than expected sales trends in core office supplies across the business.

  • Staples.com sales in the fourth quarter were up 10% in local currency excluding the extra week from last year.
    • This compares to 4% growth in the first three quarters of the year.
    • About half of Staples' global sales are coming in through our public and commercial websites.
    • More than 80% of sales on staples.com are to business customers and becoming more relevant every month.
    • At the end of Q4, expanded assortment on staples.com, staples.ca and quill.com were driving over $4 million in sales per week compared to about $1 million in sales per week at the beginning of the year.
  • Building scale beyond office supplies and we're becoming more credible with our business customers.

  • Many small and medium-sized businesses spend more on copy and print than they do on office supplies and Staples is best positioned to meet the needs of those customers.

  • Lead generation is better, driving incremental traffic to stores and better leveraging online capabilities to accelerate growth in this high-margin business.

  • At the beginning of the year, committed to driving $150 million in gross savings.
    • Surpassed this goal and we achieved over $200 million of cost reductions for the year.
  • Reduced our retail footprint by more than 1,000,000 square feet through 40 net store closures and 40 downsizes and relocations.
    • Developed a new 12,000 square foot store, we now have about 30 of these new stores in operation, which continues to retain over about 95% of sales.
    • This morning, announced that over the next two years, company plans to close up to 225 stores in North America.
  • During the fourth quarter, added iPad in over 900 of our U.S. stores.
    • tarting next week, we'll kick off a program to eliminate more than 1,100 unproductive office supply SKUs in our stores.
  • Biggest opportunities this year are related to supply chain, retail store closures and labor optimization, non-product related services, IT hardware and services, as well as marketing services.

  • Negatively impacted by unfavorable weather during some of our highest volume weeks in Q4, and as a result, same-store sales declined in the double-digits during December.
  • Also negatively impacted by the fact that company did not have Apple hardware in U.S. stores during the holiday season.

  • Also had an unfavorable comparison to highly profitable extra week last year, the negative impact of fixed cost on lower sales and increased cost related to growth initiatives in staples.com.

  • Competitive intensity during the shorter holiday season, as well as unfavorable weather in some of strongest markets like the Northeast, resulted in sales trends that fell well short of expectations.

  • Continued to experience relatively weak demand for higher-margin, core office supplies across the business.

  • Changing guidance practices and no longer providing annual sales or EPS guidance.

Posted-In: Earnings News

 

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