Staples forecasts fifteenth straight quarterly sales decline
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Customers pass by the Staples store in Manhattan, New York, U.S., August 15, 2016. REUTERS/Eduardo Munoz
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(Reuters) - Staples Inc (NASDAQ: SPLS), the biggest U.S. office supplies retailer, forecast its 15th straight quarter of declining sales as it closes stores in the face of intensifying competition.
The company and former merger partner Office Depot Inc (NASDAQ: ODP) are struggling to compete with Wal-Mart Stores Inc (NYSE: WMT) and Amazon.com Inc (NASDAQ: AMZN) at a time when people are using less stationery.
Staples' shares were down 7.3 percent at $8.65 in morning trading on Wednesday.
The company's sales fell more than expected in the second quarter and the company said it expected sales to also decline in the current quarter. It did not provide a specific forecast.
Analysts on average were expecting sales to drop 3.1 percent in the current quarter, according to Thomson Reuters I/B/E/S.
"The blunt truth is that market dynamics are firmly against Staples in that there are far more generalists in the stationery market than there used to be and online plays a much more significant role," said Carter Harrison, a retail analyst at Conlumino.
Framingham, Massachusetts-based Staples said total sales fell 3.7 percent to $4.75 billion in the second quarter. Analysts had expected sales of $4.77 billion.
Sales at its established stores in North America fell 5 percent, steeper than the 3.1 percent drop analysts polled by research firm Consensus Metrix had expected.
Besides trying to buy Office Depot - a deal that fell apart over antitrust concerns - Staples has been responding to tough conditions by closing stores and focusing on serving medium-sized businesses rather than Fortune 500 companies.
The company is also focusing on offerings other than office supplies, such as electronics and furniture, and said in May it would step up deliveries to 80 percent of total North American sales within three years in an effort to compete with Amazon.
Staples posted a net loss of $766 million, or $1.18 per share, in the latest quarter, due to a $986 million pre-tax charge related to its European operations and costs associated with the termination of the Office Depot deal. It earned $36 million, or 6 cents per share, a year earlier.
Staples reiterated it would close 50 stores in North America this year. It closed 242 stores in 2014 and 2015 as a part of a restructuring plan. Staples had 1,907 stores as of Jan. 30.
Office Depot earlier this month said it would close about 300 more stores in the next three years to help cut annual costs.
(Reporting by Abhijith Ganapavaram and Gayathree Ganesan in Bengaluru; Editing by Ted Kerr and Savio D'Souza)
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