Over the past few weeks, the battle for the top spot in the office-supply industry has seen further divergence between the two leading contenders, with former champ Office Depot
Last month, Office Depot reported a decline in third-quarter earnings, with a double-digit drop in international revenues and a slim 1% gain in domestic same-store sales. The weak quarterly results were preceded by the surprise resignation of CEO Bruce Nelson and followed by the announcement that cost-cutting initiatives will trim the ranks by some 1,700 workers by the end of the year.
While the poor results have dampened Office Depot's full-year outlook, things have been sunnier at Staples. This morning, the Boston-based retailer topped estimates by posting earnings of $0.41, or $209 million, a 24% increase over the $0.33 earned a year ago. Revenues jumped 12% to $3.8 billion, driven by a solid 4% increase in North American same-store sales and a 13% gain in delivery sales. While disappointing European results were cited as part of the problem at Office Depot, Staples' international revenues climbed 24%, or 15% before currency fluctuation.
While renewed strength in the labor market has probably helped fuel some of the advance, Staples also has an impressive track record during periods of economic uncertainty. Today's results mark the 12th consecutive quarter of 20%-or-better earnings growth, a streak that survived a fairly difficult operating environment. That consistency came at the expense of Office Depot; until last year, it had posted 16 straight quarters of declining comps.
Office Depot has decided to go on the offensive, unveiling an ambitious remodeling and expansion plan. Up to 80 new stores will be added this year, more than half of them in Staples' own backyard -- New England. Staples will be on the move as well, though; it has announced intentions to open 20 new locations in the Chicago area alone. Office Max
Despite the aggressive tactics proposed by its peers, Staples still maintains a decided advantage. Its base of 1,600 superstores is two-thirds larger than either Office Depot or Office Max, and its stores are growing sales four times faster. Furthermore, with industry-leading profit margins, more of those revenues are reaching the bottom line. Staples has also strengthened its presence in the U.K. (through the acquisition of 59 Office World Stores) and established a foothold in China.
Last quarter, the company inked contracts with a record 8,700 firms, from modest deals with small companies to a $275 million, five-year agreement with Bank of America
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Fool contributor Nathan Slaughter owns none of the companies mentioned.