NEW YORK CITY—At first glance it would seem that it's been a pretty tough week for hard goods retailers, with Radio Shack announcing plans to close 1,100 stores and Staples saying it will close 225 units over the next two years.
But the latter may not be as bad as it seems, though it acknowledges that its shoppers increasingly are buying online. Staples Chairman and CEO Ronald Sargent says there's still room to grow, even if it's not as much as he originally thought.
“I'm not sure we need as many stores today as I thought five or 10 years ago,” Sargent said at the company's fourth quarter conference call. “Previously I thought maybe 4,000 stores was probably the right number in North America. Today, in North America, there's probably room for 2,800 or 3,000 stores. Just in the U.S., there's probably room for 2,400 stores.”
Right now, the company has 1,536 stores in the United States and 337 in Canada. The key—new stores will be much smaller, using 12,000 square feet instead of its much larger superstores in response to an increasing online presence.
“Our customers are using less office supplies, visiting our stores less often and shopping more online,” Sargent said. To that end, Staples has quintupled its online offerings from 100,000 items to 500,000, and has added more safety and restaurant-related items.
Last year, the company closed 109 stores, resulting in 40 net store closures, as well as completing 40 downsizes and relocations. It also opened 30 small stores of about 12,000 square feet, part of an ongoing initiative to revitalize the chain. Even so, sales were weak.
“Over the past year, we learned a lot of valuable lessons, and have made progress. But it's not fast enough,” Sargent said. “We continue to see customer demand shifting online.”
For the year, North American and online total sales dropped 6.1 percent from 2012, though after adjustments for currency and a 53rd week, among other factors, the drop was 2 percent.
The closures should make the surviving stores more productive, particularly in the densely populated Northeast, Sargent added. It's likely that a significant number of closures and remodels to the smaller format will come through the 225 leases that come up for renewal each year.
“We are not getting out of the retail business. Our stores are a differentiator from our competition,” Sargent said. “That said, stores have to earn the right to stay open and we are committed to making the tough calls when it is necessary.”
But will it be enough?
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