3 Defining Factors Behind Staples, Inc.’s (SPLS) Impressive Growth

Investors may want to consider alternative plays in this difficult sector

Staples, Inc. (NASDAQ:SPLS) a leading retailer of office products and services has impressed investors in the past six months with a gain of 26.9%, outperforming the Zacks categorized Retail-Miscellaneous/Diversified industry’s increase of 0.9% and Retail-Wholesale sector’s increase of 5.4%.

3 Defining Factors Behind Staples, Inc.'s (SPLS) Impressive GrowthLet’s delve deeper and find out the factors driving growth at Staples.

After termination of the merger with Office Depot Inc (NASDAQ:ODP), Staples has undertaken a strategic review to bring the company back on growth track.

Staples is streamlining operations to enhance productivity and performance in North America by expanding services, strengthening customer base, shutting down underperforming stores and decreasing fixed costs. In a bid to acquire new customers, it intends to increase offering of products as well as services beyond office supplies.

The company is trying to reinforce position in mid-market contracts, as evident from the buyout of Acquired Capital Office Products, an independent office products dealer.

Staples Cost Control Measures Are Impressive 

With regard to the cost containment efforts, management is employing a more efficient customer coverage model, focusing on lowering indirect procurement costs, enhancing supply chain and increasing mix of Staples’ brand products. The company has initiated a new cost-saving program to garner nearly $300 million of annualized pre-tax savings by 2018.

Moreover, Staples continued with its plan to close stores in North America. In fourth-quarter fiscal 2016, the company shuttered 13 outlets. In an effort to improve store productivity and manage cost, the company shuttered 242 stores in fiscal 2014 and 2015 combined and 48 stores in fiscal 2016, and expects to close approximately 70 additional stores in fiscal 2017.

Efforts to Increase Productivity Continue 

The company remains focused on optimal store site in order to boost store productivity. The company intends to concentrate more on improving sales per square foot through an increase in customer traffic and by converting them into potential buyers through targeted advertising, ongoing sales training and customer-oriented initiatives.

The company provides assistance to customers with respect to PC maintenance, removal of viruses, and others.

The Bottom Line on Staples: Investors Should Consider These Other Stocks 

The aforementioned factors have helped the stock to perform exceptionally well in the past six months. However, those whose who want to buy this stock at the moment need to take some other factors into consideration as well. The Zacks Rank #3 (Hold) company’s top line has declined 3.1%, 3.7%, 4.3% and 2.9% in the first, second, third and fourth quarters of fiscal 2016, respectively.

Indeed, the fourth quarter marked the company’s second straight quarter of revenues miss.

Moreover, demand for office products (paper-based) has been decreasing due to technological advancements. Smartphones, tablets and laptops are fast emerging as viable substitutes for paper-based office supplies, and there has been persistent weakness in the office products sector.

Better-ranked stocks worth considering include Big 5 Sporting Goods Corporation (NASDAQ:BGFV) and Michaels Companies Inc. (NASDAQ:MIK).

Big 5 Sporting Goods sports a Zacks Rank #1 (Strong Buy) while MICHAELS COMPANIES carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Big 5 Sporting Goods has long-term earnings growth rate of 12%.

MICHAELS COMPANIES an impressive long-term earnings growth rate of 16%.

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Office Depot, Inc. (ODP): Free Stock Analysis Report

Staples, Inc. (SPLS): Free Stock Analysis Report

Big 5 Sporting Goods Corporation (BGFV): Free Stock Analysis Report

The Michaels Companies, Inc. (MIK): Free Stock Analysis Report

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