Staples Profit Declines as Sales Continue to Slide

Staples Inc. said its profit more than halved in the second quarter, as sales continued to decline and store traffic dwindled, deepening the chain's challenges as it awaits regulatory approval for its takeover of Office Depot Inc. Earlier this year, Staples reached a deal to buy its rival for $6.3 billion. Staples has been hit by shifts in office needs where basics like paper folders and printer toner are no longer in high demand and where discounters and Web retailers have invaded their turf. Both chains have suffered from declining sales for nearly a decade and Staples has faced pressure from activist investor Starboard Value LP, which pushed for the Office Depot deal. Chief Executive Ron Sargent said Wednesday that Staples remains on track with the merger, which it expects to complete by the end of the year. Meanwhile, Staples continues to shut stores and shave costs. The company closed 15 stores in North America during the second quarter, bringing the tally to 212 stores since the start of last year and part of a plan to close at least 225 stores by the end of this year. Staples has aimed to reach at least $500 million of annualized savings through the end of the year and said it secured about $50 million of annualized cost savings during the period. Overall expenses fell 9.1% during the quarter, partially offsetting weaker revenue. Currency-adjusted sales in North America slid 3% at stores open at least a year—the 13th straight quarterly decline. The decrease came as store traffic declined about 1% and the average order size fell 2%. Online sales, meanwhile, rose an adjusted 1% from a year earlier. Commercial sales were stronger, rising 2.6% from a year earlier on growth in facility and breakroom supplies as well as furniture. International revenue, which accounts for about a sixth of the top line, dropped a currency-adjusted 17% as European same-store sales dropped 4%. Overall, Staples reported a profit of $36 million, down from $82 million a year earlier. Per-share earnings fell to 6 cents from 13 cents. Excluding items like charges associated with the pending acquisition, earnings per share were flat at 12 cents. Revenue slid 5.4% to $4.94 billion Analysts projected 12 cents in earnings per share on $4.96 billion in revenue, according to Thomson Reuters. Shares in the company, down about 22% this year, were down 1.6% premarket.