Staples Reports Double-Digit Promo Growth

Reveals Promotional Product Growth

StaplesMassachusetts-based Staples Inc., parent company of Top 40 distributor Staples Promotional Products (asi/120601), announced a 5% decrease in Q2 sales but also revealed many encouraging developments, including double-digit promotional product growth and progress in its agreed upon purchase of Office Depot. Excluding store closures and changes in foreign exchange rates, the office supply company increased its sales by 1% in the quarter.

The company’s North American Commercial (NAC) division had sales of $2 billion, a year-over-year increase of 3%. Staples Promotional Products grew its revenue by double-digits, with similar growth in facilities supplies, breakroom supplies and furniture, according to an earnings release. The company’s NAC division had low-single digit sales declines in office supplies, ink, toner and paper.

“Our second quarter results were in-line with our expectations and reflect steady progress on our strategic reinvention,” said Ron Sargent, Staples’ chairman and CEO. “We continued to drive growth in our delivery businesses and in categories beyond office supplies, and we grew operating income during the second quarter.”

While Staples experienced a 56% decline in operating income (due to store closures and decreased foot traffic at retail stores), its GAAP operating income grew from $19 million in last year’s Q2 to $92 million this year. The company achieved $50 million in annualized cost savings during the quarter and has secured over $400 million in cost savings since the beginning of 2014.

In a conference call with investors, Sargent said the company’s $6.3 billion purchase of Office Depot remains on schedule to close by year’s end. The acquisition has received anti-trust clearance in Australia, China and elsewhere; the United States Federal Trade Commission has requested more information.

Earlier this year, Staples Promotional Products, the largest North American distributor in the industry, agreed to buy Canada-based Accolade Promotion Group (APG, asi/102905), which ranks 21st on Counselor’s Top 40 list with $75.7 million in North American ad specialty revenues. Counselor estimates that the combined promotional products revenue of Staples and APG will surpass $500 million annually.