CNN reports Staples, the office supply giant, will be shutting 225 stores in North America to trim their operating costs and fight against weak sales. The Staples store closings will be made by the middle of next year and will include 12% of its stores in North America.
With the Staples store closings, which are added to the more than 40 stores it closed in 2013, Staples hopes to save $500 million annually. Staples hopes that these measures, combined with other cost cutting measures, will be enough to combat their lower than expected sales which were reported in the most recent quarter which ended in February of this year.
Staples is not alone in their efforts to reduce costs. Radio Shack, the electronic retailer, made a similar announcement two days ago when they announced they would close 20% of their Radio Shack locations or 1,100 of their stores.
What happened to Staples?
Just like grocers such as Kroger and Tom Thumb who have had to fight against giants like Wal-Mart, Staples has fierce competition against Office Depot in the office supply market. Although Staples remains larger in terms of sales, Office Deport purchased OfficeMax last year and now has more locations throughout the United States.
What is yet to be seen, however, is what Office Depot will have to do in the next couple of years as they determine what stores they will keep open after the purchase of OfficeMax. Industry experts expect Office Depot will also begin to shut some of their own stores which may overlap in sale’s areas due to the office supply merger.
Online Retailers hurting Staples
Online sales don’t only hurt clothing stores. Staples has also been attacked by competition from online stores, including Amazon. Brick and mortar stores in all retail areas continue to be threatened by shoppers who simply peruse items in stores and then return home to purchase less expensive products online.
But Staples is now fighting back. They have also made a significant push to increase their online sales. They report, in fact, that up to half of their sales are now made online. They have also increased the number of products shoppers can buy online. For example, they now offer up to 500,000 items online. They also report their online sales have been strong, increasing an estimated 10%, compared to declining in store sales of 7%.
Staples CEO is not worried
Staples CEO, Ron Sargent, is not concerned. He believes the cost cutting measures as well as their new strategies to “fundamentally reinvent our company” are just what are needed to help the Staples customer. He also believes that if they stay the course, not only will Staples be successful in the future, they will also have reduced their costs and improved their efficiency.
News of the store closing, however, lowered the stock price for Staples by 12% in early trading.
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