Dive Brief:

• Staples has hired accounting firm KPMG to review of its overseas operations, sources told British newspaper The Telegraph, and is considering leaving the UK after its attempted $6.3 billion merger with Office Depot was blocked by the Federal Trade Commission in May. 

• Although work on its UK operations recently returned them to the black, many of its 107 UK stores are in poor retail locations, which could make them difficult to sell off, The Telegraph reports. Consumer confidence is also suffering in the country in light of the popular vote to leave the European Union.

• A Staples spokesperson told the paper that it’s “exploring strategic alternatives for our European operations. This will allow the company to sharpen our focus and more aggressively pursue our mid-market growth strategy in North America, while right sizing our retail business” and said the company had no further details to share.

Dive Insight:

The so-called “Brexit” vote, which caught many by surprise when UK voters opted to exit the EU, has seen pushback both overseas and in the country. These include macroeconomic forces, like the weakening pound and consumer uncertainty, that are generally toxic to retail operations. 

They’re the kind of effects that render a retailer like Staples—already mulling the trimming of its overseas operations, including those in the UK, and already struggling more generally in the face of e-commerce competition—low-hanging fruit.

The merger of Staples and Office Depot would have created an international office supply Goliath that relied on its impressive brick-and-mortar presence to neutralize the growing threat posed by online competition. After the failed merger, Staples said it will work to dominate in core office supply categories like ink, toner and paper, and possibly divest its European operations while exploring other acquisitions. Office Depot is also reconsidering its European operations.

Cost-cutting and recovery in its commercial office supplies business helped lift Staples in the first quarter: The company reported that Q1 North America commercial sales rose 0.4% to $2.12 billion. Total sales fell 1% year-over-year in the quarter, after excluding the impact of foreign exchange rate fluctuations and store closures during the past year.

Those efforts, including an emphasis on cost-cutting that may help to accelerate Staples' own "Brexit," will only continue as Staples attempts to go it alone in an environment where office supplies are easily bought online and at general merchandisers, leaving it with a bloated store fleet.