Staples Conference Call Highlights
Staples, Inc. (NASDAQ: SPLS) reported its fourth quarter earnings on Wednesday. Shares of the company are up 9 percent.
Below are some key highlights from its conference call.
• We are focused on three key priorities: investing in our best growth opportunities, aggressively reducing expenses and stabilizing our underperforming businesses.
• During the third quarter we made progress on each of these fronts.
• Sales growth accelerated in North American Commercial and in staples.com.
• We took important steps to stabilize the performance of our North American retail stores.
• We got back to profitability in our international operations and we're right on track to eliminate more than half $1 billion in cost by the end of next year.
• We saw growth accelerate in North American Commercial with sales up 3% in U.S. dollars or 4% in local currency. This was driven by 5% growth in contract in local currency.
• Investments we've made to drive growth beyond office supplies are paying off and we're building momentum in key categories for today we have a low market share.
• We also accelerated growth in Staples.com with sales up 9% in U.S. dollars or 10% in local currency during the quarter.
• This is a result of the investments we've made to drive business customer acquisition and a better customer experience on our desktop and mobile websites.
• We also saw strong demand online during back-to-school.
• We launched a new iPad app, which provides an improved customer experience, easy reordering, and faster search and navigation.
• We also launched a new app for the iPhone, which supports Apple Pay and makes it easy for customers to shop and check out whenever and however they want.
• We continue to build momentum in copy and print while integrating our offering across channels.
• Same-store sales for copy and in print North America were up in the high single-digits.
• We've optimized our retail store cost structure and we've reallocated marketing spend and we continue to make progress on our plan to streamline and consolidate our supply chain.
• Our Q3 results reflect our plan to become the destination for every product businesses need to succeed and we are right on track.
• We are accelerating growth in our delivery businesses.
• We're stabilizing our underperforming businesses.
• We're changing the way we work to drive cost savings and businesses of all sizes are turning to Staples for products beyond office supplies.
Sales Growth and Segments:
• Starting with North American commercial, sales growth accelerated during the third quarter with the top line up over 3% year-over-year at $2.2 billion.
• On a local currency basis sales grew 4%.
• Sales and contract were up 5% in local currency during the quarter.
• Our team-based selling model continues to differentiate Staples.
• We're gaining market share by increasing our share of wallet with existing customers as well as through strong customer acquisition.
• In contracts, we achieved solid growth in all categories beyond office supplies during the quarter.
• Facilities and break room supplies continue to set the pace with over 20% topline growth.
• We also drove double-digit growth in furniture, print and promotional products, as well as technology products.
• Sales of office supplies, ink, toner and paper were stable in contract during the third quarter.
• Sales in categories beyond office supplies now represent more than 40% of our mix in North American commercial or about $3.5 billion annually.
• These new categories will become the growth engine for our company and we plan to build on our momentum here.
• North American commercial operating margin rate for Q3 decreased 22 basis points to 7.4% and operating profit dollars were flat year-over-year.
• Same-store sales in North America declined 4% in Q3 driven by a 4% decline in traffic and flat average order size year-over-year.
• We saw improvement in the monthly comp trend throughout the third quarter and we continue to take important steps to stabilize the performance of our retail stores.
• North American stores and online operating margin decreased 178 basis points versus last year's third quarter to 7.7%.
• This was driven by investments to accelerate growth online, higher incentive compensation expense and increased marketing expense.
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