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Staples Is Shutting Down 225 Stores To Reduce Costs

Staples, Inc. (NASDAQ:SPLS) announced its decision to close 225 stores in North America as part of its multi-year cost savings plan. The largest office-supplies chain in the United States said it will be able to generate an annual pretax cost savings of approximately $500 million from the store closures by the end of 2015.

Aside from the closures, the target pretax cost savings will also come from supply chain, labor optimization, non-product related costs, information technology (IT) hardware and services, marketing, sales force, and customer service.

Last year, Staples, Inc. (NASDAQ:SPLS) shut down 42 stores in North America. The office-supplies chain operator had 1,846 stores in the region by the end of 2013. The company is facing strong competition from online retailers such as Amazon.com Inc (NASDAQ:AMZN).

In a statement, Ron Sargent, chief executive officer of Staples, Inc. (NASDAQ:SPLS) said, “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.”

Staples financial results

Staples, Inc. (NASDAQ:SPLS) reported disappointing fourth quarter financial results. Its total sales declined 5.2% to $23.1 billion from $24.3 billion in the same period a year ago. Its Non-GAAP earnings per diluted share from continuing operations also dropped to $1.16 from $1.39 in the year-ago quarter.

According to the company, its North American stores and online stores generated $2.9 billion in sales, down by 12% from $3.29 billion in the same period a year earlier. The sales of its international operations also fell 13% from $1.16 billion last year to $1 billion.

In a note to investors, Denise Chai, an analyst at Bank of America Corp (NYSE:BAC) commented that the weak sales performance of Staples, Inc. (NASDAQ:SPLS) “reflects both tough industry conditions and underperformance.” Chai’s recommendation for the stock is equivalent to a Sell rating.

Staples, Inc. (NASDAQ:SPLS) expects that its sales for the first quarter of 2014 to decline compared with its performance in the same period last year. The company estimated that its fully diluted earnings per share will be in the range of $0.17 to 0.22 in the first quarter this year.

Staples stock decline

The stock price of Staples, Inc. (NASDAQ:SPLS) declined more than 15% to $11.32 per share following the announcement. Over the past 52-week range, the stock traded from its highest level at $17.30 per share to as low as $11.16 per share at the time of this writing, around 10:53 AM Eastern Standard Time (EST).