By Cotten Timberlake
Staples Inc., the largest U.S. office-supplies chain, will close as many as 12 percent of its North American stores and cut as much as $500 million in costs as online competition continues to hurt sales.
The annual pretax savings, which the company expects to achieve by the end of 2015, will come from areas including the supply chain, sales force, marketing and information-technology services, in addition to the store closings, the Framingham, Mass.-based company said in a statement Thursday.
The retailer is facing increased threats from Internet-based rivals such as Amazon.com, a challenge that spurred Office Depot to merge with OfficeMax last year. Staples said sales in its fiscal first quarter will fall from a year earlier, the fifth straight quarterly decline, and profit will be as much as 22 cents a share, trailing analysts' 27-cent average estimate.
Staples' sales slowdown "reflects both tough industry conditions and underperformance" by the chain, Denise Chai, an analyst with Bank of America in New York, wrote in a note to clients Thursday.
Staples shuttered 42 stores in North America last year, ending 2013 with 1,846 in the region. The plan announced Thursday calls for as many as 225 closings. Kirk Saville, a spokesman for Staples, didn't immediately respond to voicemails and an email seeking comment on how many jobs will be eliminated by the cost-cutting plan.
"With nearly half of our sales generated online today, we're meeting the changing needs of business customers and taking aggressive action to reduce costs and improve efficiency," Chief Executive Officer Ron Sargent said in the statement.
Fourth-quarter sales at stores open at least a year fell 7 percent, while sales from Staples.com gained 10 percent, the company said Thursday.
Staples joins electronics retailer RadioShack Corp. in trying to overhaul its business by closing stores in the face of increasing competition from e-commerce rivals. RadioShack announced plans March 4 to close about a fifth of its stores after fourth-quarter sales trailed estimates.
Staples' fourth-quarter net income more than doubled to $212.4 million, or 33 cents a share, from $78.1 million, or 12 cents, a year earlier.