Staples Inc. will close up to 225 more stores — 12 percent of its U.S. and Canadian locations — and cut $500 million in costs in the next two years as the office supplies chain continues to falter with retail consumers faced with a growing list of alternatives.
The Framingham company, which is continuing a restructuring as its sees more sales move online, yesterday reported a fourth straight quarter of declining sales. Sales dropped 11 percent to $5.87 billion from last year, missing analysts' expectations for $5.97 billion.
Staples' stock closed at $11.35 per share, down 15.3 percent. It has fallen nearly 30 percent this year.
"Our customers are using less office supplies, shopping less often in our stores and more online, and the focus on value has made the marketplace even more competitive," CEO Ron Sargent said. "It's clear we underestimated the headwinds that we're facing."
Staples reduced its store footprint by more than 1 million square feet in 2013 through closings and downsizing. It now has 30 of its smaller, 12,000-square-foot stores open.
But the aggressive store closures are not going to be enough, according to analyst David Strasser of Janney Capital Markets.
"The company had years to close and shrink the store base, and stuck to its guns, and that decision is likely to impact them for the foreseeable future," he said in a research note yesterday. "Sales are declining at a faster pace than anticipated, and while Staples had attempted to rejuvenate the store through technology offerings, its limited ... assortment … as well as lacking the full line of top brands, like Apple, have made it tough to succeed in this category."
Staples.com sales improved 10 percent, however. More than 80 percent of Staples' online customers are business, as opposed to retail customers. As it continues to see fewer paper, ink and toner sales, the company has increased online offerings fivefold by adding technology products, furniture, facility and safety supplies, and items for restaurants and retail stores.
"But it will take time for those to gain enough traction to really benefit Staples' reported results," said R. Scott Tilghman, a B. Riley & Co. analyst.
Meantime, Staples likely will continue to take a hit due to its weaker-than-expected results and 2014 guidance, he said.
"Management credibility gets called into question because of that, and stock value will suffer," he said.
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