Staples Reorganizes to Reaccelerate — No Easy Button
Staples Inc. (NASDAQ: SPLS) is going to try to turn its ship around all on its own. The company has announced a formal strategic plan to accelerate growth and to better serve the needs of its customers. The lagging office supplies retailer plans to integrate its retail and online offerings while increasing investment in its online businesses. The real result is a reorganization with leadership changes, a multiyear cost savings plan and a restructuring of its international operations.
CEO and Chairman Ron Sargent focused on these five key priorities: accelerate growth in online businesses, fully integrate retail and online, improve retail store productivity, restructure international operations and return cash to stakeholders.
To accelerate growth, Staples is increasing investment in online and mobile capabilities and is initiating a multiyear cost savings plan, which is expected to generate annualized pre-tax cost savings of approximately $250 million by the end of fiscal year 2015.
The office retailer also plans to enhance multichannel offerings by combining U.S. retail and Staples.com operations under the leadership of Demos Parneros. Joe Doody will continue to lead Staples' North American Contract and Quill.com businesses and will assume leadership of supply chain and customer service operations in North America.
To improve retail store productivity, the company will lower the retail square footage in North America by approximately 15% by the end of fiscal year 2015. Staples will accelerate the closure of approximately 15 U.S. stores, which will result in a pre-tax cash charge of approximately $35 million during the fourth quarter of 2012. Staples said that it expects 30 net store closures and 30 store downsizings and relocations in North America during fiscal year 2012.
On the international operation restructuring, Staples plans to close 45 stores and several subscale delivery businesses in Europe by the end of fiscal year 2012. The company is also naming John Wilson as president of Staples Europe. It noted:
As a result of these actions, Staples expects to record pre-tax cash charges in the range of $145 million to $195 million by the end of fiscal year 2012. Additionally, Staples expects to record a pre-tax non-cash charge in the range of $790 million to $850 million for the impairment of goodwill and other assets within its European retail and catalog businesses during the third quarter of 2012. Staples is continuing to explore additional operational and strategic opportunities for its European operations. Staples is also pursuing the sale of its European Printing Systems business.
As far as returning cash to shareholders, Staples said it "remains fully committed to returning excess cash to stakeholders and is focused on maintaining its current investment grade credit rating." The company will continue to repurchase its common stock through open-market purchases to the tune of $450 million during fiscal year 2012. It will also repay its outstanding $325 million senior notes due October 2012 with cash on hand.
Some of today's news sounds easy and just taking things a tad further. Still, there does not appear to be a magic Easy Button here, and it does not exactly sound like those prior buyout rumors are indicating that private equity firms are pounding on the door to buy the company.
Staples shares are up 2% at $12.60 on this announcement and its 52-week trading range is $10.57 to $16.93.
JON C. OGG
Filed under: 24/7 Wall St. Wire, Business Services, Retail Tagged: featured, SPLS