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Better Integration Guides Staples Strategic Initiatives

Staples, Inc. is embarking on a strategic plan that includes integration of its retail and online elements, increased investment in its web-based businesses and operational reorganization, the company announced. The initiative also includes leadership changes and initiation of a multi-year cost savings plan.

“Our vision is to establish Staples as the single-source product authority for millions of businesses,” said Ron Sargent, Staples’ chairman and CEO. “We are building on the strengths that are the foundation of our success by focusing on five key priorities: accelerate growth in our online businesses, fully integrate retail and online, improve retail store productivity, restructure our international operations and return cash to stakeholders.”

This strategy builds on Staples’ unique strengths, the company asserted, including its world-class supply chain capabilities, extensive store network, strong relationships with business customers and industry-leading online presence. Staples noted that it is the world’s largest office products company and second largest Internet retailer.

As part of the strategy, Staples said it would combine its U.S. Retail and businesses under the leadership of Demos Parneros. Joe Doody will continue to lead Staples’ North American Contract and businesses, and will assume leadership of supply chain and customer service operations in North America.

The company will put more money in online and mobile capabilities to provide business customers with a differentiated multi-channel shopping experience, it stated. To better serve the needs of business customers, the company said it would significantly expand assortments beyond traditional office supplies, building on recent success in categories including facilities and breakroom, copy and print, and technology.

Staples plans to reduce retail square footage in North America by 15% by the end of fiscal year 2015 and is accelerating the closure of 15 stores in the United States. The store closings will result in a pre-tax cash charge of approximately $35 million during the fourth quarter of 2012, Staples said. The company now expects to conducted approximately 30 net store closures and 30 store downsizings and relocations in North America during fiscal year 2012.

In an effort to reduce the complexity and improve the profitability of its European operations. Staples plans to close 45 stores and several sub-scale delivery businesses in Europe by the end of fiscal year 2012, it said. The company also announced a leadership change in its European operations with the appointment of John Wilson as president of Staples Europe.

To help fund investments in its strategic initiative, Staples said it would initiating a multi-year cost savings plan that would generate annualized pre-tax cost savings of approximately $250 million by the end of fiscal 2015. The company expects to record pre-tax cash charges in the range of $145 million to $195 million by fiscal year 2012 end, it noted, as well as a pre-tax non-cash charge in the range of $790 million to $850 million for the impairment of goodwill and other assets within its European retail and catalog businesses during the 2012 third quarter. Staples said it would continue to explore operational and strategic opportunities for its European operations. The retailer is pursuing the sale of its European Printing Systems business and will report it as discontinued operations as of the third quarter of 2012. Staples expects to record a pre-tax cash charge in the range of $15 million to $20 million related to the action in the third quarter, it pointed out.

In addition, Staples is rebranding its Australian business as the company continues to move toward one global brand. As a result, Staples plans to record a $20 million pre-tax non-cash charge related to accelerated trade name amortization by the end of fiscal 2012, it related.