Staples sales dip as stores close ahead of merger attempt
NEW YORK (AP) — Staples suffered a 36 percent decline in first-quarter earnings as businesses increasingly go digital, a shift that has compelled its attempted merger with Office Depot.
Industry watchers had expected the profit slump as Staples closed 28 stores during the quarter ahead of its planned merger. It had pre-tax charges of $45 million related to restructuring.
A decline in sales was slightly more than had been foreseen and shares edged lower before the opening bell.
A strong dollar was one factor, negatively impacting sales growth by two percent, the company said.
Staples had been under pressure from the private equity firm Starboard Value LP to attempt to combine its business with Office Depot and earlier this year it did just that.
If approved, the $6 billion deal would end an extraordinary period of consolidation in the office supply sector. Only two years before Staples said it would tie up with Office Depot, Office Depot merged with OfficeMax in an all-stock deal worth more than $1 billion.
Office suppliers are not only under pressure from a technological shift that has crushed demand for binders, paper and pens, but also by online competition from the likes of Amazon.com, among others.
Chairman and CEO Ron Sargent has helped to stabilize the business and the company has closed 197 stores since the start of 2014, with plans to close a total of at least 225 by the end of this year.
The closings over the past year have had a negative impact of 4 percent on sales, the company said.
Staples lined up more than $100 million in annualized cost savings during the first quarter, and $350 million since the beginning of 2014.
Righting the size of the business has come at a cost.
The company, based in Framingham, Massachusetts, reported profit of $59 million, or 9 cents per share, down from $96 million, or 15 cents per share, a year earlier.
Earnings, adjusted for non-recurring costs, were 17 cents per share, which was in line with Wall Street expectations, according to a survey by Zacks Investment Research. Revenue fell 7 percent to $5.26 billion, which was worse than analysts had projected.
For the current quarter ending in July, Staples expects its per-share earnings to range from 11 to 13 cents, about in line with Wall Street projections.
Staples shares have fallen slightly more than 9 percent since the beginning of the year, but climbed 23 percent in the last 12 months.
Shares fell 7 cents to $16.41 in premarket trading.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on SPLS at http://www.zacks.com/ap/SPLS
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