Staples’ Segment-by-Segment Performance in 3Q15

Staples' North American Commercial Segment Sees 3Q15 Sales Growth

(Continued from Prior Part)

Staples’ North American Stores & Online segment

Staples’ (SPLS) North American Stores & Online segment, which sells products to customers in the United States and Canada through its retail stores and online platform, saw its sales fall by 7.8% on a year-over-year (or YoY) basis.

The segment has been under pressure due to decreasing traffic and orders in stores. Due to this, comparable sales fell by 2.0% on a YoY basis. Positive growth was seen only in the online division, which grew by 1.0% in local currency. The segment’s operating income reduced by one basis point from 3Q14.

North American Commercial segment

Staples’ North American Commercial segment sells products directly to businesses in the United States and Canada. The segment was the only one out of the company’s three segments to report positive sales growth of 1.7% in local currency on a YoY basis. Foreign exchange had an impact of 1.0% on its sales.

Staples’ chief executive officer said in the company’s conference call that the company views this segment as a leading driver of sales and profitability going into the future. The segment’s operating margin also expanded by 56 basis points due to its sales of high-margin products and decreases in its promotional activities.

International Operations

Staples does business in 23 countries apart from the United States and Canada, and these businesses form a part of its international operations. The International Operations segment was highly impacted by the strengthening US dollar in 3Q15, with sales falling by 16.8%.

The fall in sales of 3.0% in local currency was majorly due to decreasing sales in the European region. This also impacted the segment’s operating margin, which fell by 64 basis points to 0.0%.

Staples as a whole saw it operating margin expand by 21 basis points to come in at 6.4% in 3Q15. The operating margins of its peers in the retail industry (XRT) (XLY) such as Office Depot (ODP), Essendant (ESND), and Wal-Mart (WMT) came in at 4.5%, 4.7%, and 4.8%, respectively.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Staples Meets Earnings Estimates but Misses on Sales

• Part 2 - Staples Has Been Struggling with Its Performance

• Part 4 - Staples’ 3Q15 Earnings Highlights and 4Q15 Outlook