Staples Inc., the largest U.S. office-supplies chain, will close as many as 12 percent of its North American stores and cut as much as $500 million in costs as online competition continues to hurt sales.
The annual pretax savings, which the company expects to achieve by the end of 2015, will come from areas including the supply chain, sales force, marketing and information-technology services, in addition to the store closings,the Framingham, Mass.-based company said in a statement Thursday.
The retailer is facing increased threats from Internet-based rivals such as Amazon.com Inc., a challenge that spurred Office Depot Inc. to merge with OfficeMax Inc.last year. Staples said sales in its fiscal first quarter will fall from a year earlier, the fifth straight quarterly decline, and profit will fall to possibly 22 cents a share, trailing analysts’ 27-cent average estimate.
Staples’ sales slowdown“reflects both tough industry conditions and underperformance” by the chain, Denise Chai, an analyst with Bank of America Corp. in New York, wrote in a note to clients Thursday. She has the equivalent of a sell rating onthe shares.
The shares fell $2.05, or 15 percent, to close Thursday at $11.35 after dropping as much as 17 percent for the biggest intraday decline since Aug. 15, 2012.
The stock slid 16 percent this year through Wednesday, compared with a 1.4 percent gain for the Standard & Poor’s 500 Index.
Staples shuttered 42 stores in North America last year, ending 2013 with 1,846 in the country. The plan announced Thursday calls for as many as 225 closings. Kirk Saville, a spokesman for Staples,didn’t immediately respond to voice mails and an email seeking comment about how many jobs will be eliminated by the cost-cutting plan.
“With nearly half of our sales generated online today, we’re meeting the changing needs of business customers and taking aggressive action to reduce costs and improve efficiency,” Chief Executive Officer Ron Sargent said in the statement.
Fourth-quarter sales at stores open at least a year fell 7 percent, while sales from Staples.com gained 10 percent, the company said Thursday.
Staples joins a broad swath of retailers shutting stores amid sluggish U.S.sales. Children’s clothes seller Children’s Place Retail Stores Inc. said Thursday it would close 125 stores through 2016, including 41 locations it shut last year, while forecasting profit this year that trailed analysts’ estimates.
Electronics retailer RadioShack Corp. said Tuesday that it planned to close about a fifth of its stores after fourth-quarter sales trailed estimates. Department-store chains J.C. Penney Co. and Macy’s Inc. also have announced closings this year.
Staples’ fourth-quarter net income more than doubled to $212.4 million, or 33 cents a share, from $78.1 million, or 12 cents, a year earlier.
Business, Pages 27 on 03/07/2014