Staples Net Slides 9.2% on Weak Demand


Staples (NASDAQ:SPLS) saw its first-quarter earnings drop 9.2% on same-stores sales that continued to weaken in North America and Europe.

Competition from online retailers and brick-and-mortar giants like Wal-Mart (NYSE:WMT) has weighed on Staples, the largest U.S. office-supply chain. Last year, the company announced plans to cut back its North American retail square footage by 15%, in addition to reducing its workforce in Europe.

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Tepid sales in Europe continued into the latest period, as the region’s same-store sales declined 3%. In North America, same-store sales fell 2% on weak demand for computers, software and technology accessories that outweighed stronger sales of tablets and breakroom supplies.

Framingham, Massachusetts-based Staples said its first-quarter profit was $169.9 million, or 26 cents a share, missing Wall Street estimates of 27 cents a share. The results were below a year-ago profit of $187.1 million, or 27 cents a share, while earnings from continuing operations last year were 28 cents a share.

Total sales slipped 3.5% to $5.81 billion, falling short of calls for $5.91 billion.

Gross margin narrowed to 26% from 26.6%.

Online sales from posted a strong quarter, recording sales growth of 3% amid new product offerings. Staples said it has added over 90,000 new items on its website over the last year.

On a conference call with analysts Wednesday morning, Chairman and Chief Executive Ronald Sargent also cited the relaunch of a Staples rewards program that offers free shipping with no minimum purchase price.

Sales also grew at the company’s North American commercial segment, which sells office supplies and services directly to businesses. The business posted 1.7% growth, even though demand for core office supplies weakened.

The company noted that it closed 13 stores and relocated seven others in North America, while it expects to close about 40 net stores this year.

Shares fell 2.5% to $14.38 in pre-market trading. The stock has risen 12.8% over the last 12 months.