Sunday, November 23, 2014
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Staples to cut 225 locations; will Best Buy be the store survivor? (Update)

Latest chains to cut

Staples to cut 225 locations; will Best Buy be the store survivor? (Update)

UPDATE: "Too little, too late," says David Strasser, analyst at Janney Capital Markets, of the latest store closings at Staples, the Massachusetts-based office-supply chain that is also the second-largest online retailer after Amazon.com. "To close and shrink stores is the correct strategy," but sales are falling faster than expected, and Staples' "limited" technology and consumer electronics offerings (e.g., no Apple iProducts) and its weak store personnel "skill set" (compared, say, to Best Buy's Geek Squad) will make Staples' store-improvement plan "tough to succeed." Staples was "early and good" online, but now faces price-cutting, and the company overpaid for its Corporate Express acquisition, Strasser added. He's recommending clients stop buying Staples stock.  

EARLIER: Staples says it plans to close another 225 of its 2,000 stores by 2014, after closing a net 40 stores last year. The chain announced the closings after reporting sales fell last year. More here. The move follows yesterday's announcement by Radio Shack that it hopes to close 1,200 of its 5,000 stores -- if it can get permission from lenders, who are watching the chain's growing losses closely, and might prefer bankruptcy to increased sales losses by a chain that's already losing money.

Separately, "Best Buy is scrambling to avoid the fate of the Electronics Stores of Christmas Past such as Circuit City, The Wiz, and Tweeter," as well as "fast fading Radio Shack," writes bond analyst Carol Levenson for clients of Gimme Credit LLC. In fact, Levenson says Best Buy looks like it may be the "sole survivor" of the once-thriving electronics-chain-store sector: CEO Hubert Joly has stabilized profit erosion and Best Buy has been gaining market share, while cutting even more expenses (up to $1 billion a year) than it had projected. Still, she's not recommending Best Buy bonds.

"The turnaround (at Best Buy) is progressing," agrees Janney's Strasser, who is recommending Best Buy stock..

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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