Staples to close 30 even though earnings are up - to close some stores while opening others - Brief Article

DSN Retailing Today, Feb 25, 2002 by Molly Prior

FRAMINGHAM MASS. -- In the highly competitive world of office supplies retailing, where single-digit comps can't always deliver a profit, little comes as a surprise anymore. That's why few in the industry were phased earlier this month when Staples followed up news of a better-than-expected fourth quarter earnings forecast by cutting some 326 jobs and announcing plans to shutter 30 underperforming stores later this spring.

"We're doing this to stay competitive in today's economic said Tom Nutile, a company spokesman. Staples would not comment on the locations of the closings, characterizing the group simply as stores that failed to meet the retailer's financial benchmarks.

Staples is still on track to open 120 stores worldwide during fiscal 2002. The bulk of these new stores, which will create roughly 1,200 new positions, will be Dover-format stores, said Nutile. The 30 closings will affect approximately 403 workers, who can opt to apply for other positions within the company.

On Feb. 6, Staples pre-announced better-than-expected earnings as margins more than offset weak sales. The company anticipates comps will come in slightly behind current expectations.

"Our ideal situation would be to see both margins and sales move in the right direction. We believe that will come in due time. For now, however, Staples' performance is very much in keeping with its 'intelligent loss of sales' strategy," UBS Warburg reported in a recent research note. The strategy, dubbed "Back to Brighton" in honor of the first Staples store opened in Brighton, Mass., focuses squarely on serving small businesses and power users, the retailer's most profitable consumers.

The office supply industry has been challenged by slow sales growth in the United States as companies continue to pare down their workforces.

Staples will report full fiscal results for the fourth quarter and fiscal year on March 5.