Staples closing 50 stores amid dim outlook, falling sales

Dive Brief:

Staples Friday reported Q4 same-store sales fell 4% year over year, including a 1% decrease in web sales. North American fourth quarter overall sales fell 9.3% to $2.45 billion, due to weakness in sales of business machines and technology accessories.
The retailer is reportedly laying off hundreds of workers at its Framingham headquarters and plans to close 50 stores this year.
Though the retailer saw a Q4 profit of $86 million, or 13 cents per share, that missed Wall Street estimates of per-share profit of 28 cents on revenue of $5.41 billion, according to Thomson Reuters.
CEO Ron Sargent said the company plans a comeback for earnings growth this year, but expects sales to decline in the interim. Staples projected adjusted profit in a range of 16 cents to 18 cents, in line with Thomson Reuters analyst expectations' of 17 cents per share, the place it was a year ago.

Dive Insight:

Staples continues to struggle and it seems unlikely to be helped by any acquisition of rival Office Depot, which U.S. regulators have moved to block.

While the FTC in 2013 allowed Office Depot’s acquisition of OfficeMax because of increased competition in retail office supplies, that may not be enough for it to allow a Staples-Office Depot merger. Antitrust advocates like the American Antitrust Institute have warned that, while online retail mitigates the anti-competitive effects of a merger somewhat, competitive concerns remain in the office supplies segment of long-term contracts with businesses.

And while the proposed merger of Staples and Office Depot has already garnered regulatory approval from the European Union, Australia, New Zealand, and China, U.S. FTC regulators are being far more cautious.

In an effort to save the merger deal, Staples has offered to bring some $600 million in contracts to office supply wholesaler Essendant, formerly United Stationers, which could presumably boost the business of much smaller company supplies retailers like ULINE and W.B. Mason. Essendant been consolidating and expanding its own wholesale business, and said during an earnings call in October that it would be open to acquisitions, although the company didn’t comment on the specific idea of acquiring any of Staples' business.

But regulators don't appear to believe that even that solution would have enough of a mitigating effect on the loss of competition in that space. To give a sense of the size of Staples’ sales through business contracts, it will likely garner some $8.4 billion this year, while its 1,200 stores garner some $9.6 billion.