Staples reported that it has closed 80 stores of a planned 140 closures in North America in 2014. Store closings and a negative 1% impact from currency translation effects constrained sales growth in the second quarter.
Staples guided third-quarter sales “to decrease versus the third quarter of 2013,” and adjusted diluted EPS is expected to total $0.34 to $0.39. Staples continues to expect to generate $600 million in free cash flow for its 2014 fiscal year, significantly less than the $737 million it posted in 2013. In its outlook comments when it reported full-year 2013 earnings, the company said it will close 225 stores in North America by the end of 2015, and that it had initiated a cost-cutting program that is expected to save $500 million annually in pretax dollars by the end of next year. Staples expects pretax restructuring and related charges in the range of $230 million to $310 million in 2014.
Analysts had estimated EPS for the third quarter of $0.37 on sales of $5.89 billion. For the full year, the consensus estimate calls for EPS of $0.98 on sales of $22.39 billion.
Second-quarter same-store sales fell 5% in the company’s North American stores. Online sales rose 8% in the quarter, but it is not possible to say what that means in dollar terms.
Revenues were down nearly 6% in North America and down by 0.5% internationally. The company’s commercial sales were up 2.6%, but the operating income rate fell by five basis points. Operating income fell by 1.23% on a non-GAAP basis for the stores. Closing stores to maintain profits will only stave off the inevitable — Staples needs to come up with something transformative.
Shares traded up about 1.5% in Wednesday’s premarket, at $11.80, in a 52-week range of $10.70 to $17.01. Thomson Reuters had a consensus analyst price target of around $11.00 before the results were announced.
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