The second quarter wasn’t an easy one for Staples Inc. and its new interim CEO. Not only did its merger with rival Office Depot fall through, but the office suppliers retailer reported today a 4% drop in overall sales during the quarter ended July 30.
A bright spot in the Q2 earnings report was North American Commercial, or NAC, the business unit that manages sales to businesses through e-commerce sites StaplesAdvantage.com and Quill.com. NAC posted relatively strong if slack sales of $2.044 billion, down by less than 1% from $2.045 billion a year earlier, but the unit’s net income increased 5.8% to $146 million from $138 million a year earlier. Some of NAC’s sales are handled offline through sales reps and contact centers, but a big majority of them, or about 80%, are processed online, the company says.
“I’m confident our future is bright, our strengths outnumber our challenges,” interim CEO Shira Goodman said on a conference call today. Goodman, who took over the top executive spot in June from Ron Sargent, who left the company after the aborted merger with Office Depot. Staples and Office Depot abandoned their merger plan after a federal judge blocked the $6.3 billion deal over antitrust objections raised by the Federal Trade Commission.
Goodman noted several positive developments, including that “well over half of our sales are generated online through our private and public websites.” The company sells online to businesses of 10 or more employees through its NAC sites StaplesAdvantage.com and Quill.com; to companies through specially branded websites, and to small firms and individual consumers through Staples.com.
Goodman said Staples will continue its shift away from stores to online orders and direct-to-customer delivery as it closes more stores over the next few years. It will shutter at least 50 stores this year, and it will have more than 200 store leases expiring in each of the next three years “so we can continue rightsizing our store network” without taking on excessive closing costs.
Goodman added that Staples is looking into “strategic alternatives” for its European operations and has received interest from several buyers, as it plans to focus more on its North American business.
“Over the coming years,” she said, “more than 95% of sales will come from North America, more than 80% will be delivered, and more than 60% will come from categories beyond office supplies.”
Staples reported for the second quarter ended July 30:
Total sales fell 3.7% to $4.752 billion from $4.937 billion a year earlier;
North American Stores & Online unit sales, which include Staples.com, of $1.987 billion, down 5.7% from $2.108 billion;
A net loss of $766 million, compared with net income of $36 million;
Non-GAAP net income, which excludes several hundred million in pre-tax charges related to the termination of the Office Depot merger, was $79 million, up 3.9% from $76 million; GAAP, or generally accepted accounting principles, is the standard method that U.S. business use to account for their finances.
For the 26 weeks ended July 30, Staples reported:
North American Commercial sales of $4.160 billion, up .07% from $4.157 billion a year earlier;
North American Stores & Online unit sales, which include Staples.com, of $4.234 billion, down 5.4% from $4.479 billion;
Total sales fell 3.4% to $9.853 billion from $10.198 billion;
A net loss of $725 million, compared with net income of $187 million.
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