Ups Number of Stores it Expects to Close This Year from 30 to 40 Based on New Guidelines Over Whether to Renew Pending Lease Expirations
Office supply chain Staples recently upped the number of stores it expects to close this year from 30 to 40 based on new guidelines it is now using to determine whether to renew pending lease expirations.
Staples has already closed 13 stores this year and downsized and relocated seven stores in North America. In addition, it has streamlined its store labor model in the U.S. to reduce costs. In the last 12 months, it closed 48 stores in North America.
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"Our plans for 2013 now call for approximately 40 net store closures in North America versus our previous guidance of 30 net store closures," Ronald L. Sargent, Staples chairman and CEO, told analysts this month. "We also continue to expect a total of 45 relocations and downsizes for the full year."
Staples said it has a couple of hundred stores coming up for renewal every year. Now, in considering whether to renew an expiring lease or not, the retailer is not only considering the individual store's performance, but also looking at what it calls the network implications of those stores.
Demos Parneros, Staples president of North American Stores & Online, said this concept involves deciding whether nearby stores in the market might benefit if a lease is not renewed. He added this is "definitely a tweak in our approach."
"We take a very hard look at store-by-store and then network-by-network," Parneros explained. "We look at individual store profitability and margins as well the network. And the thing that's been encouraging for us is that we've got good line of sight for the next 3 years."
"It's about 750 to 800 stores coming up. And it really comes down to a deal-by-deal situation," he said. "And if it really makes sense to pull the trigger and close the store, we've been aggressive in doing. (However,) if we feel like the store's profitability is good enough and even with risk for the next few years, it's fine. We renew on a very short-term basis and we've been successful at doing so."
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