Staples 4Q13 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

-2% comp, but sales down 11% overall

“if you exclude that extra week, as well as the negative impact of the stores we closed in the 12 months before Q4 of this year and the stronger U.S. dollar, total company sales were down about 2% year-over-year.”

Online sales up 10%

“with online sales. Staples.com sales in the fourth quarter were up 10% in local currency, excluding the extra week from last year.”

It’s clear we underestimated the headwinds

“It’s clear that we underestimated the headwinds that we’re facing in our retail stores as well as demand for core office supplies. We’re holding ourselves accountable.”

Closing 225 stores

“the next 2 years, we plan to close up to 225 stores in North America. While we don’t take this decision lightly, we know it is the right thing to do for the long-term health of our business as we become more efficient and increase our focus online.”

1600 stores left

“we need to be more aggressive in closing our marginal stores and also accelerate investments in remerchandising and rightsizing the remainder of our 1,600 stores in North America.”

Stores are a differentiator though

“I want to make it clear that we’re not getting out of the retail business. Our stores are an important differentiator versus the competition. They are a key part of our omni-channel strategy, and we know customers appreciate the convenience and service stores provide.”

Still feel like it’s a problem to not have Apple in stores

“We were also negatively impacted by the fact that we did not have Apple hardware in our U.S. stores during the holiday season.”

It’s good not to own space when you’re downsizing

“I guess that’s the good news, is that we don’t own really much of our retail assets. It’s all leased. So you probably have another — every year, you have another 225 stores up for renewal that you can kind of work through.”

Minute by minute pricing

“Today, we change prices daily. And very soon, we’ll be changing prices minute-by-minute to really to generate like personalized offers for customers through our Runa business that we recently acquired. So we’re in the process of implementing price-scraping tools to ensure that we’re appropriately priced versus our competitors across all categories. And I don’t know that you have to be priced exactly the same on every single SKU in your assortment. But I think on those key items, I think you’ve got to be priced aggressively.”

Differentiated by business customer base

“our value proposition. It’s much different than, say, an Amazon’s value proposition is. First of all, our customer base, much more business than consumer. Virtually 80% of our delivery sales are to businesses versus consumers. I think you differentiate yourself around free next-day delivery. I think you differentiate yourself around your contract business, which is — offers customized pricing and probably better pricing than you’ll see online”

5 or 10 years ago thought 4k stores was capacity, now 3k

“‘m not sure we need as many stores today as maybe I thought we did 5 or 10 years ago. Back then, I thought maybe 4,000 stores was probably the right number in North America. Today, in North America, my guess is there’s probably room for 2,800 stores or 3,000 stores.”

Customer drives the bus

“the customer always drives the bus. And if you’re not providing kind of what the customer is looking for, you should close your store. And if you are, you’ll get to keep your store open”

Hard to reinvent a company that size

“Okay, thank you. Reinventing a company our size is really hard, but that’s our job when customers shift what they buy or where they buy or how they buy. “

Staples 2Q13 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. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Total company sales were $5.3 billion. That’s a decrease of 2% versus Q2 of last year.”

“staples.com sales were up 3% in U.S. dollars and grew 4% in local currency”

“Turning to our services business. Copy and print sales in North American Stores & Online were up in the mid-single digits”

“we’ll continue to go down the path of making closure decisions upon lease end, and we have between 175 and 200 lease decisions over the next 3 years. With respect to the downsizings, we’re seeing good success with downsizings. Our new store size is 12,000 square feet, and we’re seeing roughly a 95% sales retention on that.”

“the combination of less rent and the good omni-channel capability inside stores looks like a very positive combination for us”

“We’ve been taking price investments over the last year. I think we’re going to continue to take intelligent price investments. We think the direction we’re on ought to be able to allow us to stabilize comps. We expect the comps to stabilize, certainly, the remainder of the year. But yes, I agree. I think there are some categories where — particularly when you’re comparing online competitors, where we’re too high, and we’re continuing to take those prices down.”

“It seems like, the last 3 years, we’ve seen back-to-school start later and later and later in the season. And I think in a few years, July is not going to really be much of a month for back-to-school. I think it’s kind of pushing closer to school.”

“they’re better controlling their spend than they ever have and also the mix of what you’re selling them. So everything from Board of Directors’ presentations that used to be sent out in hard copy in binders are now being done digitally on tablets. So it’s a change in technology. It’s impacting our core business. That’s why when we look at NAC in this quarter, the headwinds that we had to fight were negative office supplies, ink, toner and paper, all slightly negative, in spite of what I would argue as slight market share gains.”

“Small business traffic is slightly down, consumer traffic is better, but neither is great. In terms of the categories, it’s a combination of PCs, because of its size, and then the related businesses, computer peripherals, software, things like that, that are just — they have no chance to grow, they’re just deteriorating fast. In the traditional supplies, some of those areas were down, not severely, but they have an impact on mix.”

“we’re moving fast. I don’t have a precise date. But I actually think that with some of the categories that are going away, some boxed software is actually shifting, as well as going away, peripherals are reducing, and moving to our online business, a lot of this is going to continue to shrink, and we’ll continue to reposition the stores and have more productive stores.”

“You just look at computers being replaced by mobile devices, whether it’s phones or tablets, and it used to be computers were 95% and tablets were 5%. Now it’s about — it looks like about 60% computers and about 40% tablets. So that kind of gives you a sense for where that market is moving, and tablets are going to be, not replacing, but certainly bigger than computers very soon.”