Staples Inc. (SPLS) Profit Falls, Outlook Lacks Sheen

staplesBy Staples Investor Relations [Public domain], via Wikimedia Commons

Staples, Inc. (NASDAQ:SPLS) announced that its fiscal first quarter profit dropped 43% in the wake of low sales of office supplies and less traffic at stores. Shares toppled 16% in 2014, falling as much as 10% in early trading on Tuesday, affected by the results and lower-than-expected second quarter outlook.

“Despite a slow start to the first quarter, our results were in line with our expectations, and we expect to build momentum throughout 2014,” Chief Executive Ron Sargent said Tuesday. Sargent added that the company is making progress in fulfilling the demands of customers “as we reinvent Staples.”

Earnings drop for Staples

For the first quarter, Staples, Inc. (NASDAQ:SPLS) posted earnings of $96.2 million or 15 cents per share, which is a drop from $169.9 million or 26 cents per share in the corresponding quarter of the previous year. Earnings for the company came in at 18 cents per share after excluding restructuring-related charges and other items.

Sales for the quarter came down 2.8% to $5.65 billion. Quarterly same-store sales dropped 4%, reflecting a 4% decline in traffic from the previous year after excluding website sales. Analysts polled by Thomson Reuters were estimating earnings of 21 cents per share and revenue of $5.61 billion.

For the second quarter, Staples, Inc. (NASDAQ:SPLS) is expecting earnings to settle between 9 cents and 14 cents per share on lower year-over-year sales, against analyst forecasts of 15 cents a share.

Tough time for brick and mortar retailers

Staples, Inc. (NASDAQ:SPLS) along with its competitors, is running through a hard time due to emergence of online stores and a technology transformation that has made some office supplies irrelevant.

A few months back, Staples, Inc. (NASDAQ:SPLS) announced the closing of around 225 stores by the end of next year. On Tuesday, the company mentioned that it has shuttered 16 stores in North America during the first quarter and is planning to close another 80 stores in that region during the second quarter. The company expects to bear a charge of $105 million to $155 million due to restructuring efforts in the second quarter. For the full year, the company is expecting total restructuring and related charges of $240 million to $360 million.

Competitor Office Depot Inc (NYSE:ODP) also recently announced the closing of 400 stores in the United States.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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