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Amid an ongoing slump in sales of traditional office supplies like printer ink and toner, can Staples return to growth by shrinking its brick-and-mortar presence?
Staples, the office-supply chain, saw its shares fall by as much as 6.8 per cent on Thursday as it blamed continued weakness in demand for home printers and cartridges in part for its 16th consecutive quarter of sales decline.
The company, which has been shrinking its business operations over the past year following a failed attempt to merge with rival Office Depot, saw revenue drop nearly 3 per cent to $4.56bn during the fourth quarter as it shuttered up shops and traffic slowed in its remaining stores.
Net loss swelled to $952m in the three months to end of January, compared to a net profit of $86m in the prior-year period. The bulk of the losses came from $766m in goodwill impairment it booked from the sale of its European operations.
Adjusted net income totalled $161m, or 25 cents a share, below analysts’ expectations for $164.6m.
During the fourth quarter of 2016, Staples completed its planned sale of its retail business in the United Kingdom and struck a deal to sell a controlling interest in its remaining European operations.
The pullback from overseas markets comes the struggling retailer attempts to re-focus on its primary North American market, where it is also attempting to scale back in an effort to return to profitability. It said it closed 48 stores altogether in 2016, including 13 in the fourth quarter, and plans to close another 70 North American stores in 2017.
Comparable sales figures show why Staples is increasingly looking to move past reliance on a physical retail presence. Comparable sales — a key industry metric – fell nearly 1 per cent across the business as a whole, Staples said, although the pain was felt more acutely in its retail division, where comparable sales were down 8 per cent, compared to a 1 per cent increase in its delivery sales versus a year earlier.
In both divisions, traditional office supplies like ink, toner and technology were the biggest drag, while its delivery business benefitted from growth in sales of facilities and breakroom supplies and computers, while print and marketing services were the brightest spot in its retail segment.
Getting the right mix for the evolving office environment will be key to returning to profitability in the coming year, Staples executives said on a conference call with investors on Thursday morning.
Staples executives said that they plan to do more to enhance their delivery business, and they are testing out new ways to entice small- and medium-sized business customers — including, executives said Thursday, new alcohol and wine deliveries to businesses.
Shira Goodman, Staples’ chief executive, said: “I do think for the overall business as you start to see the movement in mix, you will see the sales stabilize.”
Over the past 12 months, Staples shares have fallen nearly 10 per cent — in line with the 10.6 per cent fall that rival and one-time prospective merger partner Office Depot has seen over the same period.