Staples 2006 Annual Report Download - page 4

Download and view the complete annual report

Please find page 4 of the 2006 Staples annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 140

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

We have a terrific opportunity to improve store productivity by growing our offering in services. Our high margin
in-store copy and print centers have really taken off, as we’ve invested in technology, people, and training.
We’ve also begun to test stand alone Copy & Print Shops in urban markets. We’re aggressively growing
technology services with our Staples EasyTech business – staffing every store with technicians to help customers
with services such as hardware and software installation, PC repair and tune ups, and security and data
protection.
Offering office products expertise through additional retail channels continues to be an incremental source of
both customers and sales. With Staples aisles now successfully installed in more than 2,400 supermarkets, we’re
looking at developing other partnerships with retailers such as college bookstores.
With a focus on customer service and consistent execution, our North American Retail business will continue to
invest in growing market share and differentiating our offering to drive sales and profits.
North American Delivery
Our North American Delivery business continued to achieve industry-leading sales growth and profits in 2006, and
is the fastest growing area within the company. North American Delivery represented 32% of our sales and 38%
of our profits during the year. Top-line growth was up 19% to $5.9 billion and we achieved an operating income
margin of 10.7%. $4.4 billion of our North American Delivery sales were recorded on-line, making Staples one of
the largest internet retailers in the world.
We plan to keep the momentum going by working hard to acquire more customers in each of our three delivery
businesses, Contract, Quill, and Staples Business Delivery. In addition to adding to our sales force and driving
productivity, one of the greatest growth opportunities in Delivery is cross-selling new products and services to our
existing customers. We’re increasing our “share of wallet” by expanding into high margin product categories like
cleaning and break room supplies, furniture, mail and ship supplies, as well as profitable services like copy and
print and technology. To enhance our strong organic growth, we made several small acquisitions in 2006. We
acquired Kross, a small contract stationer, to add to our customer base in the Kansas City market. We also
acquired Chiswick, expanding our industrial packaging supplies assortment, and Thrive Networks, adding
capabilities to provide our customers with IT services like network maintenance and user support.
International Operations
Staples’ International business is becoming an increasingly important component of our growth strategy. This
segment includes 264 stores in five European countries as well as catalog and internet operations in 19 countries
throughout Europe, Asia, and South America. While our International operations represent just 13% of our sales
today, we are building a solid foundation for growth and profit improvement. In 2006, sales grew 13% to $2.4
billion, and operating profit rose to $51 million, achieving a 2.1% operating income margin. We’re making
significant investments to build a successful global business, and we see tremendous opportunity for growth over
the next several years.
In our European Retail business, we made excellent progress in our efforts to turn around our UK Retail
operations, the largest business in our International portfolio. With dramatic improvement in customer service,
merchandise assortments, supply chain, and marketing programs, we were pleased to see customer traffic as
In our North American Delivery business, our supply chain capabilities are good, and we’re working to make them
great. In 2006, we focused on making our network more efficient, improving customer service and building out
our network of fulfillment centers to support our rapid growth. During the year we added three new multi-
channel fulfillment centers in Orlando, Florida, Atlanta, Georgia, and Beloit, Wisconsin to ensure great customer
service and position us for sustainable growth in key markets.
Our relentless focus on customer service was recognized for the third year in a row by JD Power and Associates,
which certified our call centers for outstanding service. North American Delivery is well positioned to continue to
drive service improvements, expand our delivery infrastructure, and develop new businesses featuring high margin
products and services.