Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Office Depot Inc (ODP): Staples, Inc. (SPLS) Takes a Break

Page 1 of 2

Earlier this summer, office supplies retailer Staples, Inc. (NASDAQ:SPLS) took a detour from its typical path of supplying businesses with paper, ink, and paperclips and started selling barbecue grills, coolers, and patio furniture ahead of Fourth of July celebrations.

While the retailer tried to play it off as an extension of its breakroom supplies that it offers to businesses, I suggested the rationale was a stretch far removed from the selling of paper towels and coffeemakers. Rather than building on a core part of its business and taking it in a new direction, Staples, Inc. (NASDAQ:SPLS) was really deploying an offshoot of “deworsification,” a concept coined by famed money manager Peter Lynch to highlight when a company moves so far afield from its core competency that management’s time, effort, and money are wasted.

Staples, Inc. (NASDAQ:SPLS)

And the move doesn’t seem to have helped boost the slack sales the office supplies leader has been experiencing. Revenues for the second quarter, which ended on Aug. 3, fell 2% to $5.3 billion as the summer spectacular failed to generate additional foot traffic, with same-store sales dropping 3% year over year.

Although its breakroom business did witness some growth, it wasn’t nearly enough to offset the declines elsewhere. Which is why the news it just scooped up online office supplier Lonesource is a welcome reprieve from the recent false starts and poor management decisions made over the years. Staples, Inc. (NASDAQ:SPLS) still hasn’t recovered from the ill-timed acquisition of Corporate Express just before the market imploded, and it’s had to shut down its European printing business.

Of course, the problems aren’t wholly of management’s making, as the industry reels from the impact of the recession. That factor alone accounts for why rivals Office Depot Inc (NYSE:ODP) and OfficeMax Inc (NYSE:OMX) are forced to seek solace in a merger that is still pending completion. I’ve argued before that the industry and Staples, Inc. (NASDAQ:SPLS) would have been better off had the Justice Department not quashed its attempt to acquire Office Depot Inc (NYSE:ODP) a few years back, but regulatory hubris supplanted marketplace reality so that we ended up with three damaged businesses spread too thin instead of two healthy rivals.

The trio now are doing what they can to right-size, closing down hundreds of stores (and they will likely close down hundreds more when the Depot/Max merger goes through), and Staples, Inc. (NASDAQ:SPLS) acquisition of Lonesource shows management is thinking about its future.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!