Staples’ Mid-market Sales increase in Q2

Originally written by Andy Braithwaite and published at opi.net

Staples has said that sales to mid-market customers at its Staples Business Advantage (SBA) were up 11% year on year in its second quarter.

Overall, the company’s sales for the quarter ended 29 July were $3.9 billion, a 3.1% decrease as reported but a comparable decline of 1.1% excluding: store closures, the sale of the Staples Print Solutions Division in Q2 2016, the acquisition of Capital Office Products in Q4 2016, and foreign currency adjustments.

Adjusted operating profit for the quarter fell by almost 15% to $116 million while adjusted net profit was down around 13% to $76 million. Adjusted operating margin decreased by 41 basis points to 3%.

Staples’ earnings press release was light on detail about the second quarter performance and the reseller is not holding a quarterly analyst conference call following the announcement of Staples’ proposed acquisition by Sycamore Partners.

Nevertheless, OPI has dug out a bit more information on Staples’ Q2 results that was contained in a regulatory filing with the US Securities and Exchange Commission.

North American Delivery (NAD)

Q2 sales at NAD fell by 1.6% to $2.55 billion. The decline was mainly due to the sale of the print solutions division last year, while sales also fell at Quill and Staples.com. Staples said the sales declines in these two channels were partially attributable to historical reductions in marketing and customer acquisition spend, as well as lower promotional activity at Staples.com.

The fall in sales was partially offset by organic growth in SBA and the impact of the Capital Office Products acquisition. As well as the 11% increase to mid-market customers (partially from the Capital acquisition), Staples also said it grew sales organically with large corporate and enterprise customers.

The organic growth in SBA was driven by increased sales of technology products and solutions, jan/san supplies, and food and breakroom supplies, partially offset by declines in office supplies, ink and toner and paper.

NAD operating profit fell by almost 16% year on year to $138 million and operating margin was down 100 basis points to 5.4%. Staples said the fall was due to strategic investments to drive growth, including investing in the supply chain and sales force, as well as other cost increases.

North American Retail (NAR)

NAR sales for the quarter were $1.36 billion, 5.9% lower than a year earlier. Stripping out the impact of store closures and currency translation, same-store sales were down by 3%. The same-store decline was due to lower customer traffic and there were declines in the ink and toner, office supplies, computers and office machines categories.

NAR reported a Q2 operating loss of $4 million, an improvement on last year’s loss of $8 million. Staples said this was due to an increased gross margin rate partially offset by an unfavourable impact of lower sales on fixed expenses.