Staples 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Not happy with our NA results

“trends in our North American retail stores remained weak. We’re not satisfied with our results here; we’re focused on improving traffic, we’re taking aggressive action to further reduce retail expenses and we’re closing under-performing stores.”

On track to close 140 stores this year

” we remain on track to close approximately 140 stores for the full year.”

Staples.com growth was +8%

“Staples.com continue to gain momentum with sales growth up 8% versus the prior year. This growth was supported by continued expansion of our assortment beyond office products. During Q2, we increased our marketing investment to drive business customer acquisition.”

Obviously, the office supply market is over-supplied

” It’s obvious to me that the office superstore industry is over stored in the United States and that is driven by the shift to online as well as the decline of paper-based office supplies. That’s why we’re closing 225 stores and that’s why we’re downsizing a lot more than that and that’s also why Office Depot and OfficeMax merged and why they’re closing 400 plus stores as well.”

We don’t think retail goes away though. Customers value it

“Having said all that, I don’t believe that retail goes away. I think retail is important to customers. I think customers like retail for convenience, they like it for immediacy, products services, face-to-face customer service. And I think increasingly, we think there’s an opportunity as a place to pick up online orders or drop off online returns or maybe even in the future do same-day shipping out of stores as well. We do think that kind of this omnichannel offering is important and I think is a winning proposition, I think for us long-term.”

Eventually, the customer is going to tell us how many store closings is the right number

“I think our customers are going to tell us how many stores, what size the stores are, the product offering as well as pricing. And I think our retail performance is certainly going to tell us if 225 store closure is the right number to close as the industry consolidates. If sales trends remain weak, you should expect us to close stores beyond the 225 that we’re targeting for this year and next.”

We’re being aggressive with our real estate strategy

” the first thing that we’re doing is we continue to be aggressive with our real estate repositioning program whether it be through the lease renewal program that we’ve got in place, our downsizing program or simply closing stores that are not performing well.”

Focusing on service revenue. Remerchandised stores

“In terms of inside the store and traffic, there are a number of things that we’re doing. The first one is continue to build on our strengths, to grow our services business which is a much stickier, better customer for us and we’re seeing good growth in copy and print. We’re testing out a large number of other services and prepared to continue to roll those forward.

Last call we talked about our re-merchandising of our stores, we completed all 1,400 U.S. stores. We added in approximately 1,400 or so SKUs”

We’re excited about multiple apple product releases this fall

“Apple in our stores is a very important component. It’s been in our stores less than a year. We started selling iPhones recently. We haven’t yet had a new Apple product release and we’re excited about multiple product releases this fall.”

blah blah blah omni blah blah blah

“Final thing and probably the one that I’m most excited about and our team is most excited about, and most importantly our customers are most excited about is the omni plan. Customers are changing the way that they shop retail stores and online. They want the benefits of both. We know that customers who shop both are far more valuable customers and happier customers that if they were to shop at either of the two channels.”

Store closings are going to save 43m

” when you look at the annualized cost savings from the 225 stores that we’re going to be closing, it’s approximately about $190,000 per store or $43 million in total once we get them closed.”

Going to benefit from competitor store closings too

“We’re going to continue close the lowest performing stores. At the same time I think we should see some continued benefit from Office Depot closures and I think those were getting underway I think after back-to-school. So we’re going to continue to close stores that we don’t see kind of earning the return on capital and we’ll keep open the ones that are.”

Staples is the place for other things your office needs

“you’ve known Staples is the place to buy office supplies, and now you’re going to know Staples is the place to buy everything your business needs to succeed and that’s the Make More Happen television campaign that we launched earlier this year and kind of roll throughout the second quarter, so tens of millions of dollars spent on kind of the brand re-launch, Make More Happen.”