As part of an effort to save $500 million in costs, Staples Inc. said it plans to close 225 stores by the end of 2015, the Wall Street Journal reported.
After posting declining sales and traffic for its fiscal fourth quarter, shares of Staples, the largest U.S. office supplies retailer, fell more than 10% in early trading as results for the period fell below Wall Street projections.
"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," Chairman and Chief Executive Ron Sargent said.
With cuts coming throughout the company, from supply chain to "labor optimization," the office-supplies retailer said it is looking to generate annualized savings of $500 million by the end of 2015.
According to WSJ, looking ahead, Staples said it expects sales to decline in the current quarter and sees per-share earnings between 17 cents and 22 cents. Analysts polled by Thomson Reuters had expected 27 cents a share on a 1% drop in revenue.
"The company is the largest office-supply chain in the U.S., but the retailer and its rivals have faced tough competition from online stores, along with changes in office technology that have strained sales," WSJ reported. "Last month, competitor Office Depot Inc. said it expected sales to decline this year even after its November merger with OfficeMax Inc., a move aimed at reducing the saturation in the office-supplies market."
In the prior-year period, compared with a profit of $78.1 million, or 14 cents a share, Staples posted earnings of $212.3 million, or 33 cents a share for the period that ended in Feb.1.
Staples posted 46 cents a share in earnings in the year-ago period, excluding debt extinguishment and the termination of a joint venture in India.
"Staples' disappointing fourth-quarter performance further highlights the ongoing secular and cyclical challenges facing the office supply retailing industry," BB&T Capital Markets analyst Anthony Chukumba wrote in a note to clients.
Staples has been shifting its focus to new categories such as business technologies, breakroom supplies, and copy and print services from traditional office supplies like paper and toner, WSJ reported.
