Staples 4Q16 Earnings Call Notes

Shira Goodman – CEO

Narrowing geographic focus to NA

“Finally, we made great progress narrowing our geographic focus to North America. While we have successfully provided tremendous value to business customers across Europe over the years, we have not been as successful creating shareholder value in Europe. We believe it’s in the best interest of our shareholders to narrow our focus to North America where we have our strongest return on net assets, greatest scale advantage, and most compelling value proposition.”

Invest in the delivery business

“our investments in growing the delivery business are really of four types. First and foremost is growing our sales force. And keep in mind that’s inside outside specialists, we said when we launched 20/20 that it would be about 1,000 sale reps over three years, and we’re on track with that; obviously increasing the productivity of our sales team to leveraging data, digital marketing et cetera; staying competitive on pricing, our pricing in the contract segment is actually quite competitive, and we will continue to do so but that is not the single largest area of investment; and then just investing in the supply chain to keep pace with the growth of the delivery business.”

Omni is growing

“I was just going to say, I want to be clear that omni is growing, albeit it’s not the core component of our growth strategy. So, as an example, buy online and pick up in store which is a great win for the customer from a convenience perspective; it’s a win for us, and that we don’t pay for the last mile delivery is a growth area for us very much so. And the same can be said for ships from store which really helps us again with managing our dispersed inventory, especially end of life inventory more prudently and efficiently.”

Trying to understand a niche

“I was just going to say, I want to be clear that omni is growing, albeit it’s not the core component of our growth strategy. So, as an example, buy online and pick up in store which is a great win for the customer from a convenience perspective; it’s a win for us, and that we don’t pay for the last mile delivery is a growth area for us very much so. And the same can be said for ships from store which really helps us again with managing our dispersed inventory, especially end of life inventory more prudently and efficiently.”

Staples 2Q16 Earnings Call Notes

Staples’ (SPLS) CEO Shira Goodman on Q2 2016 Results

Doubling down on stables business advantage

“My top priority is to position our Company for sustainable, long-term sales and earnings growth. And we’re doing that via our Staples 2020 strategy. This strategy includes a dramatic change in our mindset and our operating model. We’re doubling down on Staples Business Advantage, our North American contract business where we have solid momentum on both the top and bottom line, as well as a best-in-class offering to build on.”

Moving from retail culture to delivery culture

“So to sum up, at Staples, we’re in the early innings of a dynamic and pronounced strategic repositioning. We’re moving from a product focus to a customer focus. We’re moving from a retail culture to a delivery culture. We’re evolving from a high/low pricing strategy to more everyday value. We’re transitioning from a products company to a products and services company. ”

North American commercial markets have been very competitive

“So despite what the FTC is saying, North American Commercial has always been a very competitive market for us and I would say the competitive intensity is pretty constant. Yes, we’re seeing some Amazon out there, but a lot of the competition still is the local dealers and we do have very significant, I think, competitive advantages over them.”

Discussion of competition and advantages in mid market

” it’s a very broad competitive set. It’s everything from dealers, to Office Depot, to online players, to warehouse clubs, etc. And in developing our value proposition mid-market, we’ve thought very carefully how do we win against each one of the different competitors, so how do we place something. So our goal is to be — our antes are deep assortment, competitive pricing and very reliable and flexible delivery and that enables us to compete against one set of competitors as an example.

The delivery is a plus versus the warehouse clubs. But on the other hand, what’s critical and what’s really our differentiator is expertise and services and that enables us to compete against a different set of competitors. The other thing I would say about mid-market which I think we’re somewhat unique in the space, is it is the combination of what I’d call the online and the off-line that really gives us a unique and highly valued by customer offering. So we leverage our eCommerce and digital capabilities that most folks are more familiar with through our public websites, but we have it on our private website.”

Miscellaneous Notes 5.19.16

LaSalle Hotel Properties (LHO) CEO Michael Barnello on Q1 2016 Results

Clearly we’re heading into a downturn

“Well, we’ve been through the cycles before, and there is no exact timing of when they turn up or turn down. The thing that we tried to outline in our prepared remarks is that we’ve seen the cycle’s lots of ways. Clearly, we’re heading into a downturn, and we’ve emerged from those downturns in the past with a stronger company. We have great assets with great asset managers and great operators, so it’s not a question of wondering if we’ll get through any kind of downturn. We know we will. And many times, it actually made us even stronger. But the priorities are to operate as best as we can in this environment despite the fact that we see the trends are slowing, but we’ve told the operators just to take more of a heads in beds mentality with how they’re booking the business. So, we’re looking out further.”

There wasn’t anything in 2008 to suggest that we would get 2008

“There is nothing to suggest that the downturn will look anything like what happened in 2009, but there wasn’t anything in 2008 to suggest that either. So, who the heck knows? It’s so hard to say, I mean, you have to pick your downturn because of the very big difference between 1991 and 2001 and 2009. Unfortunately, it hasn’t revealed itself as to what’s going to happen.”

LafargeHolcim’s (HCMLY) CEO Eric Olsen on Q1 2016 Results

The price environment is strengthening

“Let me start by making a few points about our performance. First, the price environment is strengthening. We have driven a clear directional shift in pricing in Q1 2016. Although prices remain much lower than at the same quarter last year, two-thirds of our country has raised prices from Q4 to Q1, driving an average price increase of 2.1% quarter-on-quarter, excluding India.”

Turnarounds are under way in China, Indonesia and India

“Third, China, Indonesia and India turnarounds are underway, and we are starting to reap the benefits of the decisive cost initiatives we have put in place. China and Indonesia results stabilized in the first quarter and in India, we saw visible results of cost-cutting, notably coming from our fuel strategy.”

Ron Wirahadiraksa

We’ve seen price increases in the brunt of our markets especially the US

No, no. It’s okay. Yeah. We did see price increases in the brunt of our countries with couple of specific callouts in the U.S., very strong market. We’ve seen price increases in Canada, both East and West. In Mexico, where we altered our strategy of last year which was more volume-driven, we still got – we see, and as I’ve said, good price increases, 13%, and the volume uptick of 8%

Staples’ (SPLS) CEO Ronald Sargent on Q1 2016 Results

FTC did not take the threat of Amazon into account in Staples Office Depot merger

“I think everybody on the call knows that last week the U.S. District Court, District of Columbia granted the FTCs request to block our acquisition of Office Depot. We were disappointed that the FTCs request was granted despite the fact that in our view it failed to define the relevant market correctly and fell short of proving its case. The FTC excluded ink and toner from the market definition of consumable office supplies. They only focused on Fortune 100 customers and acknowledged that there were no concerns about any harm to consumers or small or medium businesses. The FTC ignored the competitive threat from Amazon business and a host of other competitors and also encouraged witnesses to say things that weren’t true to bolster their case.”

Staples 4Q15 Earnings Call Notes

Ronald Sargent

Customer traffic weak in North America

“In North American stores and online, customer traffic was weak during the fourth quarter. Some of these head wind was driven by our decision to be less promotional during the holiday season and not to open our stores on Thanksgiving Day. But beyond these headwinds we continue to continue to face weak traffic in our stores and our desktops website in the United States.”

Christine Komola

Biggest issue facing us is the secular decline

“We haven’t heard a lot about employment and you guys track employment statistics the same we do. The change or we’ll know a little bit later today. [Cross Talks]. Our competitors are always looking for competitors. Customers are always looking for competitive pricing. That’s a constant and that’s not going to change. I would say probably the biggest that it’s the secular decline and the headwind that that gives off.”

Shira Goodman

Ongoing decline is 1-2% per year

“Okay. So our best estimate of the overall market decline, and here I’m talking around our legacy categories of supplies, ink and paper, is about a negative 1% to 2%. In terms of the behavior of our existing customers, it’s relatively constant. As I said, our goal, our strategy and what the team is really executing to is to compensate for the core decline with BOS growth, and those are categories which by large have some growth in them where we have very, very little market share, and where we have shown inability to gain share. “

Miscellaneous Earnings Call Notes 11.19.15

El Pollo’s (LOCO) CEO Steve Sather on Q3 2015 Results

We’ve seen reduced visits from some of our more price conscious consumers

“it was reduced the visits from some of our more price conscious consumers.”

It’s going to take some time for consumers to come back in and see these value initiatives

“I think it’s going to take some time to as consumers come in and see these value initiatives that are on the menu now as well as the service improvements that we’re making. And I think that’s just going to take more time to bring those consumers back. Let them experience that both on the price side and the service side and regain those customers.”

We’re fortunate that minimum wage headwind is being offset by lower commodity prices

“In terms of then managing pricing versus margins, I’m not ready to get into a full discussion about 2016 margins. One thing I will highlight is obviously we do have a minimum wage impact. Fortunate thing is on the commodity side, as we highlighted it worked 3% to 4% deflation, which were actually offset the minimum wage impact on our business”

Value conscious consumer is trading down

“when we did the research what we found is that we saw that the fact — the frequency has declined in our business, especially among we call more value conscious consumers. And we ask them where do you go instead of El Pollo Loco, it was pretty clear where they’re going, which was down to the lower end called the Taco Bells, In-N-Out Burgers and McDonalds.”

Burberry Group’s (BURBY) CEO Christopher Bailey on Q2 2015 Results

Impacted by weaker Chinese Consumer

“given the importance of the Chinese consumer to the luxury sector, our retail sales were affected by a slowdown in total Chinese spending. This reflected weakening consumer sentiment following the stock market turbulence and economic uncertainty over this summer.”

The US slowed markedly in the second quarter

“the U.S. slowed markedly in the second quarter. This reflected uneven demand from both the domestic and tourist consumer. The drivers here remain hard to read against a backdrop of a generally positive economic picture. However, we believe recent stock market volatility may have influenced local sentiment, and that the strong dollar discouraged tourist spend.”

The fundamentals of the luxury industry are changing. Growth is slowing

“current macroeconomic uncertainty, notwithstanding, there is no doubt that the fundamentals of the luxury industry are changing. Growth in Chinese luxury spending is moderating, competition in digital is intensifying, pricing leverage and space growth are tempering and customer behavior is rapidly evolving. For these reasons and more, sector growth is now forecast at just 1% to 2% in 2015 compared with 7% just a couple of years ago.”

Xinyuan Real Estate (XIN) Q3 2015 Results

Xinyuan Real Estate says that Chinese government policies continue to favorably impact business

“With respect to our operational effort on the government policies to continue to favorably impact our business. In the fourth quarter, we remain committed to driving performance of our shareholders with our quarterly cash dividend program. We will execute our sales purchase program as appropriate based on valuation.”

Bancolombia (CIB) Q3 2015 Results

Saw a significant depreciation of the Colombian peso against the US dollar

“During this period, we saw a significant depreciation of the Colombian peso against the U.S. dollar, which caused Bancolombia balance sheet to grow faster when presented in pesos. Let’s remember that the depreciation on an annual basis, it is 53%; and in a quarterly basis, it is 19%.”

Minimal impact though because operations are dollarized

“Nevertheless, despite every expression of assets and abilities into Colombian pesos, the impact in shareholders’ tangible equity is very small. This is due to the fact that all of our operations in Central America are dollarized and the assets that we have in U.S. dollars in Colombia are funded with liabilities in U.S. dollars as well.”

NIM was impacted by a raise in rates by the central bank

“A third topic that drove, and is driving the business environment today is of the monetary policy in Colombia. The Central Bank increased rates by 75 basis points over the last couple of months, which currently proceeds at a level of 5.25%. These increase coupled with our lower growth in deposits in the Colombian system and the higher stock of long-term debt caused the cost of funds to increase during the third quarter. As a result, we experienced a compression in the net interest margin during the quarter.”

Cresud’s (CRESY) CEO Alejandro Elsztain on Q1 2016 Results

Low commodity prices affecting our portfolios

“The low commodity prices are affecting all of our portfolio in all the region and there was a big drop that we saw on the prices mainly on the corn and soybean is effecting margins in all region too. ”

Good weather conditions for crops

“we can see how good weather condition in the region allows a positive start during this planting moment. Rainfall for this summer is above average as we’re going through a New Year. As we can see in the map Argentina presents good weather conditions in general particularly good in the Northeast of the country. In Brazil, even though the rainy season got delayed, the rains went back to the average levels along the normal soybean and corn productions.”

Copa Holdings SA (CPA) Pedro Heilbron on Q3 2015 Results

Latin America continues to be affected by slower economic growth

“Financial results for the quarter were in line with expectations, as Latin America continues to be affected by slower economic growth and weaker currencies. We expect the situation to continue in the short to medium term.”

We expect things to stabilize next year, but not expecting dramatic improvement

“we’re not building into our guidance an economic – an improvement in the economics of our region, we are expecting currencies to be stable, to stabilize, but we’re not building in a dramatic improvement to the economies.”

The Coca-Cola’s (KO) Management Discusses on Morgan Stanley Global Consumer & Retail
Sandy Douglas – President-Coca-Cola North America

Now expecting 4 point worse headwind from FX than expected on 3Q call

“Since our third quarter earnings call, the U.S. dollar has continued to strengthen. So while our business results are on track, we now expect a greater headwind from currency. After considering our hedge positions, current spot rates, and the cycling of our prior year rate, we now expect a seven point headwinds on net revenue and 11 point headwind on income before taxes for the quarter. Now, this is a four percentage point worse than the guidance that we provided.”

Consumers are moving to smaller packages which is higher revenue per volume

“The consumer is now changing. The consumer is moving to smaller packages. A 12-ounce can traded to a 7-ounce can is a 30% reduction in volume, but it’s an increase in revenue.”

TJX Companies’ (TJX) CEO Carol Meyrowitz on Q3 2016 Results

Carol Meyrowitz – Chairman and Chief Executive Officer

We like competition

“there is always competition and our job is to be outrageous value every day and have a very unique eclectic mix and that’s what we strive for. We don’t harp on we move forward, we don’t harp on the competition, we like competition, we like when we are next two, I won’t name certain stores, but we’re fine with it, it brings traffic and our job is to do a better job.”

JPMorgan Chase’s (JPM) Management Presents at the Bank of America Merrill Lynch
Daniel Pinto – Chief Executive Officer, Corporate and Investment Bank

IN fixed income trading you need to have scale and diversification

“when I look at the fixed income business, I think that, in my view the key of success in fixed income is scale. It’s a relatively expensive business to run and if you have scale, you can make it profitable. The other component that is important to me is to have diversification because when you look at what has happened for the last couple of years, two, three years, one of the challenges in business was the rate business. This year is doing very well. So credit has done very well in the last few years even though the climate this year has a bit more challenge than before.”

I do believe the Fed will move in December

“I do believe that the Fed will move in December. I think that, as you look at where the market is pricing today, is probably pricing 75% probability of that were to happen. So I think that the impact in trading will be not very relevant at all. I think that the Fed is starting to cycle.”

M&A is still healthy. Companies have to show growth somehow

“The M&A process is still very healthy and will continue to be so in the sense that companies will – the S&P earnings growth this year is zero when you look at the evaluation. So you would argue that companies need to demonstrate some growth. At this level of growth, in the United States for the economy, there will have to be a bit more inorganic than organic, so therefore the M&A will continue as long as funding and capital is available. I think that funding and capital is available. I think that the risk appetite overall has dropped recently.”

Walgreens Boots Alliance’s (WBA) Management Presents at Morgan Stanley Global Consumer & Retail Brokers Conference
George Fairweather – Chief Financial Officer

This whole industry is going to see reimbursement pressure

“I think specialty like other parts of market will continue to come under reimbursement pressures. I don’t think there is any part of the market that’s going to escape. And this is just the way of – the way of our industry. The healthcare expenditure here in the United States is still a high proportion of GDP versus perhaps what you might see in Europe where I come from. And I believe that what we are going to see in our market is continued pressure on growth in healthcare expenditure. We will see pressures in various reimbursements and then what we have got to do is continue to drive efficiency, drive the front-end profitability.”

Micron Technology Presents at UBS Global Technology Brokers Conference
Ernie Maddock – Chief Financial Officer and Vice President, Finance

It would be pretty silly for the Chinese to try to compete in DRAM

“I would tell you that if you aren’t in the DRAM space, it’s kind of tough to imagine finding that a particularly appealing space to want to deploy a lot of capital and a lot of effort in and certainly as has been released in the press over the last couple of days, I think there’s been some commentary made about at least one particular Chinese entity having not being interested in DRAM per se. But it’s a business that is quite mature. It’s hard to envision that capacity expansion will be required based upon what we know of bit growth and where we think folks would be on the technology curve. And I think whether your perspective is that DRAM technology is very near the end of its technical capability or not quite to near the end. I think there is at least some amount of finite lifetime that certainly [indiscernible] if I were thinking about a rational economic investment in an industry, it wouldn’t be one that is in this state of maturity, because I think the opportunities for success there would be pretty low.”

Still in the very early stages of understanding the potential of 3D X Point

“because it is arguably the first new memory technology in 20 years, we’re having to learn how that market is going to develop. And of course, there is a relationship between how quickly the market develops, how quickly output ramps up and what happens to cost as a result of that. So there are still a lot of variables at pay that are quite different than the visibility, the understanding and comprehension we have of the NAND business or the DRAM business. So we are at the very early stages of learning here”

E-House’s (EJ) CEO Xin Zhou on Q3 2015 Results

Next year’s real estate market wont be much different from this year’s in China

“Overall, we don’t think next year’s real estate market will be very different from this year’s. The main theme is still efforts encouraged by the government to reduce inventory, reduce the overall level of inventory. And we continue to believe the Tier 1 and Tier 2 market overall will be healthier relative to the Tier 3 and Tier 4 business, which will continue to experience difficulties.”

Staples’ (SPLS) CEO Ron Sargent on Q3 2015 Results
Ron Sargent – Chairman and CEO

Markets softened across all categories early in the quarter

“Early in the quarter, the markets softened across all categories relative to the trends we had seen during the first half of 2015. We also saw deceleration in our contract print business as we cycled a couple of large customer wins from last year and continue to feel pressure from the ongoing digitization of our forms business.”

I don’t know if there’s been a lot of change in corporate spending behavior

“from my perspective, I don’t know if there’s been a lot of change or differences in corporate spending behavior. I know in general, technology has been weak and we have had great success in selling products beyond office supplies.”

Office supplies down to only 45% of sales mix

“You look at the total company mix, gosh, it wasn’t that long ago, we were probably 75% to 80% office supplies and today I think that number for the whole company is probably about 55% office supplies and 45% BOS or beyond office supplies, and obviously, as BOS continues to grow, at some time point those lines will cross and will be more non-office supplies than we are office supplies.”

Macy’s Management Presents at Morgan Stanley Global Consumer and Retail Broker Conference
Karen Hoguet – Chief Financial Officer

Clearly the consumer isn’t doing as badly as our industry

“clearly the consumer isn’t doing as badly as what my industry, our industry is doing, because of some of the shifting in spending patterns of the customer. But that didn’t change between Q2 and Q3.”

Top malls are still going to be fabulous shopping experiences

“one of the thought from the industry that I hear most often is what is the future of malls? And we kept hearing ourselves saying, we have absolutely no doubt that the top malls are going to continue to fabulous shopping experiences.”

Wells Fargo’s (WFC) Management at BAML conference
David Carroll – Senior EVP, Wealth and Investment Management

I’m bullish on financials

“Personally, I’m very overweight financials; I have it for a long time. But seriously, I’m pretty bullish on the sector. I think institutions are very positively positioned relative to raising rates. I think if we do get any kind of economic expansion, financials are going to be the beneficiary of it. But, we are better capitalized more liquid than we have been in a decade. I think in our case, given the breadth of our business mix, whatever parts of the economy, you are experiencing growth we are going to benefit from it.”

DOL proposals on fiduciary standard have unclear impact

“Again we don’t know. There is speculation that this could be the catalyst for the demise of 12b-1 fees and other types of network — networking fees. We don’t know. So it’s kind of pointless to speculate on it. At the end of the day, we have enough confidence in our platform and in our client relationships. We think we’ll be successful.”

Tractor Supply Company’s (TSCO) CEO Gregory Sandfort Presents at Morgan Stanley Global Consumer and Retail Brokers Conference

There’s a lot of things that can’t be delivered to a customer via drone

“Omnichannel for us is a growing business but there are a lot of things that can’t be sold on omnichannel and delivered to the customer through a drone or through an easy methodology. And some of these things are things that are unique to Tractor and we have to find ways to get it to our customer.”

Philip Morris International (PM) Management Presents at Morgan Stanley Global Consumer and Retail Brokers Conference
Jacek Olczak – Chief Financial Officer

Russian market responding to price increases reasonably well

“So far the total industry volumes are responding to the price increases within the sort of acceptable elasticity ranges, but we’ll have to – I think Russia will remain one of the least of the countries to watch the next year. I mean so far everything seems to be working well. There is some down trading, but with the price increases which we are taking there, I mean obviously you will have some down trading.”

No Macro environment that really concerns me

“Nothing today stands in the least which would worry me. There are few places to watch, but I think it’s pretty manageable going forward.”

General Motors’ (GM) CEO Mary Barra Presents at Barclays 2015 Global Automotive Conference

More change in this industry in the next 5 years than we’ve seen in the last 50

“I believe that we’ll see more change in this industry in the next five to 10 years than we’ve seen in the last 50, but we are not waiting to follow, we are not waiting to be disrupted, we are disrupting ourselves because with all these changes and challenges there is also opportunity whether it’s the strength in the U.S. market whether it’s the growth potential in China although China is moderating and even with the non-traditional entrants coming in the space when you look at the assets that we have and I’ll cover them as we go through the presentation, we feel we are well positioned.”

Will be launching the Bolt 200 mile range

“And we’re very excited about the next generation Volt which is the foundational technology that enables us to be able to be launching the Bolt, and the Bolt will go 200 miles on a charge, this really starts to change the equation in all electric, remember the Bolt is extended range electric vehicle because once you get to 200 miles you really get to a point for most drivers most days even with unexpected, you’re not going to create range anxiety”

You could make the argument that sharing cars will expand the market

“”when you look at sharing you can look at it and say, hi that’s going to be less cars sold. But you can also say it’s going to enable people either the use or people who have some impairment or at an age where they are not able to drive. And so I think it expands the market.”

Staples 2Q15 Earnings Call Notes

Office Depot merger continues to progress

“We continue to make good progress on the regulatory review process. During Q2 we received anti-trust approval from China and New Zealand and just last week we received clearance in Australia. In the United States, we continue to work cooperatively with the Federal Trade Commission, and we remain on track with our response to the second request for information. Outside the United States, we are also on track with the regulatory review process and related filings in the European Union and Canada.”

Back to school has been in line with our expectations

“While most of the big back-to-school weeks are still ahead of us, early results have been right in line with our expectations.”

Store closures are boosting comps

“Our store closures I think are helping our comps by, I don’t know, 150 or may be 200 basis points, but recognize the ones we are closing are kind of farther apart from each other or in many cases in single store markets where you don’t get a lot of transfer. I think Office Depot in many cases are closing stores that are across the streets from each other. So my guess is that their comp lift would be better. But when we look at our total comp trends, it’s really all in technology, and we are hoping that with the Windows 10 launch we’ll see better technology sales in the second half.”

Pronounced shift in tablet and reader business

“on tech; what I’d say about that particular quarter is that there was a more pronounced shift down in the tablet and reader business, that’s shifting away at this point. [Indiscernible] pressure around the PC business as we’ve seen in prior quarters.”

We all agree that paper is going away, but it was flat

“paper which we all think that’s going away; paper which is almost 10% of our mix was flat if you take out the store closures and FX.’

Euro weakness pressuring margins in European business

“with the euro down as much as it has been, it has had a substantial impact on our product cost, and unfortunately many of our contracts particularly with government entities, it’s not possible to pass those cost increases along fully. So that’s the pressure we’ve been facing and we are working to mitigate that and renegotiate many of those contracts.”

Where does the business go when a location closes

“With respect to where does that business go, remember these are stores that are closing, not as much to get, and it goes to a variety of places. A little bit goes online, a little bit probably goes away and a little bit goes to whoever is around, where was the most convenient and that’s close to the store or customers just figure out a way, they just spread that around”

Our contract business is a lot different than Sysco/US foods

“We certainly feel that our industry is really dramatically different from the food distribution industry. It’s an industry that I know well. If you look at all office supplies customers, they routinely split their purchase of the office supplies in the way of the products, and they do that among many different suppliers.

And in contrast when you look at restaurants, they primarily rely upon suppliers that offer one-stop shopping, unlike the food service business, they often supply distributors. They can really on third party distribution infrastructure, such as Ascendant or S.P. Richards to serve these regional and national accounts.”

This is a competitively intense industry

“Obviously Amazon recently launched Amazon Business which we expect to pose a significant threat to the B2B office products industry. Along with there are a lot of other e-commerce competitor. So I think it’s more competitively intense in our industry.”

We know we have to fundamentally reinvent the company

“We said all along, we said three years ago, we could ride this business a while longer and continue to show improvements and profitability, but we weren’t sure that was the right solution for the long term. We said, given what’s going on with the product trends of paper based office supplies and the channel shift and the competitive factors out there. We said, we fundamentally have to reinvent the company. We have done a lot of hard and heavy lifting over the last three years and we also implied that it was going to be a three year challenge to do that.”

Staples 1Q15 Earnings Call Notes

Ongoing weakness in computers. Office supplies flat. Copy and print services growing

“From a category perspective, the 3% decline in comparable sales was driven by ongoing weakness in computers and mobility, business machines and accessories, which were down in the double digits year-over-year; office supplies, ink and toner and paper were about flat, and we continue to drive growth in copy and print services, facility and breakroom and mailing and shipping supplies.’

Business technology drove entire decline

“business technology, computers and mobility drove the entire 5% same-store sales decline in North America during Q1. Today these categories make up about 30% of our retail sales mix, but less than 20% of our retail gross margin dollars.”

Specifically PCs and tablets

“From a category standpoint, clearly tech was the big drag for the quarter, and primarily within tech, it was PCs and tablets. Although I’ll tell you we had good solid growth in supplies categories, including breakroom services.”

Making progress on traffic

“The other thing that I should mention is that store traffic, which has been a big challenge for us, we continue to make progress there as well, as well as store conversion. And huge portion of decline came from lower ticket again driven by tech. So doesn’t make it better, but we feel like we have a very good understanding of what happened and we executed our plan I think pretty well.”

Expect to start growing the top and bottom lines again

“I am pleased about the balancing act we’ve had, but the investments we’ve made over the last couple of years are not to generate bottom line; they’re to generate top line. So we expect to get back to growing. I think foreign exchange will certainly lap itself over the next four months, I believe. We’ll get the stores closed that we wanted to close, and I think we’ll lap that as well. But no, I think our view is we’re going to get back to growing the top line, but you’re right, we certainly want to be improving the bottom line. ‘

Staples 4Q14 Earnings Call Notes

Acquiring office depot

” last month we announced plans to acquire Office Depot. Staples and Office Depot have put the right resources in place to get the deal approved as smoothly and as quickly as possible. ”

Acquisition gives us scale to compete with people who are much bigger

” I think the Office Depot, OfficeMax, Staples combination really gives us a historic opportunity to be even more competitive on pricing as we look to compete with competitors who are much bigger than Staples in the future.”

Decline in PCs and tablets

“the negative 4% for Q4 in stores that was I would say entirely driven by tech and unfortunately the good balance that we saw in copy print and our core supplies business and decent growth in some of the other emerging categories was offset by essentially the decline in PCs, PC peripherals and actually the tablet business. So, it’s a little bit worse in Q4 than we expected and we have seen in other quarters, but essentially that was because of the entire miss.”

People moving to stores close to them rather than online when store closes

“Majority is moving to the store nearby. We have tried to measure the online, there is a slight pickup online, but I would say overwhelming majority is to the closest stores.”

Customers and suppliers excited about acquisition

“our customers would say guys this is a great opportunity to take costs out of the Staples operation and hopefully you will be able to pass some of those savings along to us. I think for the most part, something like 70% I would think was a positive and upbeat. I would say probably 25% or 30% were more in the neutral range. And I think in terms of suppliers, I think in general, our suppliers were probably that sort of ratio or maybe even a little better.’

Big customers know what their suppliers costs are

” frankly the other thing is, they are clear that obviously they watch our costs very carefully. They look at our raw material inputs very carefully. And if obviously we weren’t providing great value and lower prices all of the time or better services all the time, there are other places to go.”

Big competitors today

” obviously Grainger is selling office supplies these days. Amazon has just launched their B2B offering. We have got some credibly strong regional players. And there are a lot of even large companies that buy from local mom and pops, and there are thousands of them out there.’

Think they can get $1 B in synergies out of acquisition

“When you look at the $1 billion of synergies that will come to us as part of the Office Depot acquisition that’s a part of it, but frankly it’s a small part. And when you look at the big parts, you got to look at purchasing efficiencies, marketing spend that will not be duplicative. You got supply chain. You certainly have retail store optimization, but I think G&A would be a large one as well. So, until we have a chance to spend more time with Office Depot and really put together an integration plan and we are working to see if we can kind of do that with maybe a third-party so that we can speed up the process. Until we can do that, it’s going to be hard to be too specific, but the retail store optimization is kind of a small part of the total synergies.’

We’ve been trying to reposition the company

“2.5 years ago we said we could ride the paper-based office supply business for a while longer, but that probably wasn’t the right idea long-term and we announced the reinvention plan that we announced I believe it was in maybe September 2012. We knew that we had to make a lot of investments, because paper was being replaced by technology. We knew that there was a channel shift going on from retail to online. And we also realized that the competition in the future was probably going to be different than the competition in the past. Over the last 2 years, we have done an amazing number of things to kind of reinvent Staples, whether it’s expanding the product line from 30 to over 1 million SKUs in the beyond office supplies category, whether it’s rationalizing our store network, whether it’s taking cost out of every line on the P&L investing heavily in our online business and our contract business. So, we are trying to position the company for the future. And I think those investments that occurred in ‘13 and ‘14 they are never as quick or as easy as you would like, but I think when you look at the last couple of quarters, we are starting to see the returns from those investments. And frankly when you look at 2015, it’s going to be a little less of an investment year and a little more of kind of deliver on those investment years.”

Product destination for business

“We will remain focused on achieving our vision to become the product destination for business.”

Staples 3Q14 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

Sales in categories beyond office supplies are 40% of sales

“Sales in categories beyond office supplies now represent more than 40% of our mix in North American commercial or about $3.5 billion annually. These new categories will become the growth engine for our company and we plan to build on our momentum here.”

-4% Comp

“Same store sales in North America declined 4% in Q3 driven by a 4% decline in traffic and flat average order size year-over-year. We saw improvement in the monthly comp trends throughout the third quarter and we continue to take important steps to stabilize the performance of our retail stores.”

You do get some transfer from Office Depot closing stores nearby, but they know their customers well

“Clearly when we close one of our own because we get everything that’s there, when they close generally they close one of two or one of three, and they still remain in the market, so there is not as much to take, plus they pretty much know their customers. So I think when you do your own and especially if you are selecting the one that have high transferability of those. So the earlier ones tend to be better honestly but you are on the better.”

I think there are some elements of better business formation

“It’s a little hard to know in real time, but I think the answer to your question is it sustainable? I think the answer is absolutely yes. And whether that’s the economy or new business formation kind of helping us that’s great but really we think the things that we have done to kind of reengineer the business, to revamp how we go to market with our customers, the things that we’re selling and frankly boss beyond office supplies. I mean we understand that the big picture is that the paper based office supplies are going to continue to decline a couple of percent a year and that’s why we have spent so much energy and effort and money in building this boss capability.”

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.” growth was +8%

“ 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.”