Staples is clipping along as the #1 office supply superstore operator in the US and as a worldwide leader in the office category. It sells office products, furniture, computers, and other supplies through more than 1,900 Staples stores in the US, Canada, the UK, Australia, Brazil, and a half-dozen European countries. In addition to its retail outlets, Staples sells office products via the Internet and through its catalog and direct sales operations, including subsidiary Quill Corp. The company also provides document management and copying services at its stores.
The office products giant's North American retail business (stores and online) contributed about 45% to sales during fiscal 2016 (ended January 30, 2016) Its North American Commercial segment (40% of sales) sells and delivers office products and services directly to business. Staples' International segment (15% of sales) runs stores and provides direct-to-consumer and direct-to-business delivery of office products in about two dozen countries.
Core office supplies, ink and toner, and business technology are Staples' largest product lines, accounting for about 25%, 20%, and 15%, respectively, of total revenue.
Staples rang up almost 75% of its sales in the US during FY2016, while its 305 stores in Canada brought in more than 10%. Staples also has more than 105 stores in the UK, as well as a retail presence in about a half a dozen other countries in Europe, and Australia and Argentina.
Sales & Marketing
The company targets customers through a variety of adverting and marketing formats, including radio and television, printed circulars, online advertising, mobile apps, and social media.
The company has been spending less on advertising in recent years. It spent $478 million on advertising and marketing in FY2016 (ended January 2016), down from $496 million and $499 million in fiscal years 2015 and 2014, respectively.
Staples' sales have been in steady decline over the past several years due to weak sales and store closures in North America combined with fierce competition from e-commerce office suppliers and Office Depot. Its profits have fluctuated over the years as well as it has worked to restructure and streamline its operations.
The retailer's sales fell 6% to $21.1 billion during fiscal 2016 (ended January 30, 2016), with about two-thirds of the decline being driven by unfavorable foreign exchange rates and the other one-third being led by store closures. Same-store sales in the North America Stores & Online segment dipped 4% on lower average order size and lower customer traffic (with worse computers and mobility, business machines, and technology accessory sales), while International Operations sales declined 16% on unfavorable foreign exchange rates. The one bright spot: the North American Commercial segment's sales rose 1% thanks to higher sales of facilities supplies, breakroom supplies, and furniture.
Despite sales declines in FY2016, Staples' net income nearly tripled to $379 million largely as its restructuring store closures and layoffs slashed selling, general, and administrative expenses. The retailer's operating cash levels tumbled 6% to $978 million for the year after adjusting its earnings for non-cash expenses such as impairment charges, depreciation, and inventory write-downs tied to restructuring activities.
International expansion became a priority for Staples when sales in North America slowed as a result of the last recession. Staples continues to build a foundation for future growth, however, particularly in Asia and South America, with delivery businesses in Argentina, Brazil, China, and Taiwan, as well as a franchise arrangement with a partner in India.
As consumers continue to migrate toward purchasing more merchandise and services online, Staples is also closing retail stores in North America as part a restructuring plan started in 2014 which aimed to save $500 million annually by the end of 2015. The chain closed more than 200 stores in North America in 2015 and another 50 stores in 2016, while also laying off more than 1,000 employees between November 2015 and January 2016. To help drive traffic to its retail stores, Staples has added an in-store pickup option for purchases made online. Shoppers can also use an iPad app or new in-store touch screen kiosks to make purchases.
To counter the effects of its shrinking office supplies business, Staples has expanded the number of its stores that sell tablets and mobile devices. It's also inking partnerships to expand its merchandise mix. In mid-2014, for example, Staples began offering workplace furnishings from Steelcase on Staples.com and in certain US Staples stores. The company's future plans include an expansion of more service offerings, such as copy and print and technology services.
Mergers and Acquisitions
In April 2015, the company bought the iOS app Makr, which allows users to design and print materials, along with its parent company Happy.
Also in April 2015, Staples expanded its promotion products offerings while building upon its position as the US' largest distributor of promotion products after acquiring Accolade Promotion Group (AGP), a leading distributor of promotional products in Canada.
In July 2014, Staples acquired Vancouver-based PNI Digital Media, whose technology enables retailers to offer on-demand personalized products, including business cards, invitations, and photo books, for about $67 million.
In October 2013, the company purchased San Mateo-based Runa, a software company that helps online retailers increase sales by personalizing the shopping experience.
Facing increasing competition from the merged Office Depot and OfficeMax, Staples agreed to acquire the combined company in early 2015; however, the merger was called off in 2016.
The deal was expected to close by the end of 2015 but was delayed and ultimately called off in 2016 after the Federal Trade Commission sued to block the merger. The FTC contended that, if allowed, the merger would have left US consumers with only one major office supply retail chain, which could have driven prices higher across the office supply marketplace.
In 2010, in a move that significantly enlarged its footprint in Europe, Staples acquired Netherlands-based business supply wholesaler Corporate Express NV after a hard-fought deal valued at about $2.7 billion. Corporate Express is a major office products wholesaler, with more than half of its sales generated in the US through Corporate Express US. The acquisition also established Staples's contract business in Canada.