Staples 2014 Annual Report Download - page 125

APPENDIX B
STAPLES B-7
STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (continued)
North American Stores & Online
2014 Compared with 2013
Sales decreased 5.9% for 2014 compared to 2013. This
decrease was driven by a 4% decline in comparable store
sales primarily due to lower traffic, an approximate negative
2% impact from store closures, and a $158.9 million negative
impact from changes in foreign exchange rates. Sales declines
were partially offset by an 8% increase in Staples.com (in local
currency) driven by increased business customer acquisition,
improved customer conversion and an expanded assortment
beyond office supplies. Comparable sales, which include
comparable store sales and growth in Staples.com as defined
further below, declined 2%. Declines in business machines
and technology accessories, computers, and ink and toner
were partially offset by growth in facilities and breakroom
supplies, copy and print, and mobile phones and accessories.
Business unit income as a percentage of sales decreased to
4.5% for 2014 from 6.6% for 2013. The decrease was primarily
driven by investments to accelerate growth in Staples.com,
increased incentive compensation, and increased marketing
expense to drive awareness of our expanded product offerings.
These expenses were partially offset by reduced retail labor
costs and increased gross margin rates in retail stores.
2013 Compared with 2012
Sales decreased 6.1% for 2013 compared to 2012. Sales for
2012 include $221.4 million of revenue related to the additional
week in 2012. Excluding the additional week, sales for 2013
decreased by 4.3% from 2012. This decrease was driven by a
4% decline in comparable store sales due to lower traffic, a 1%
negative impact on sales from the closure of 78 stores during
fiscal 2012 and the first three quarters of 2013, and a $102.9
million negative impact from changes in foreign exchange
rates. Sales declines were partially offset by an increase in
sales for Staples.com. Declines in business machines and
technology accessories, office supplies, computers, ink and
toner were partially offset by growth in tablets and other mobile
technology, facilities and breakroom supplies and copy and
print services.
Business unit income as a percentage of sales decreased
to 6.6% for 2013 from 8.3% for 2012. The decrease was
primarily driven by unfavorable product margins due to an
increased mix of lower product margins on Staples.com,
deleverage of fixed expenses on lower sales, and investments
to optimize our pricing, profit improvements and sourcing
strategies. These expenses were partially offset by a reduction
in incentive compensation.
North American Commercial
2014 Compared with 2013
Sales increased 2.8% for 2014 compared to 2013. The
increase was primarily due to increased sales of facilities
and breakroom supplies, furniture, business machines and
technology accessories, and promotional and print solutions.
This was partially offset by decreased sales of ink and
toner and a $35.3 million unfavorable impact from foreign
exchange rates.
Business unit income as a percentage of sales decreased
to 6.9% for 2014 from 7.5% for 2013, primarily driven by
increased incentive compensation, pricing investments in
Quill, and investments in sales force. These declines were
partially offset by reduced marketing expense and leverage of
fixed expenses on increased sales.
2013 Compared with 2012
Sales decreased 0.8% for 2013 compared to 2012. Sales of
2012 include $158.9 million of revenue related to the additional
week in 2012. Excluding the additional week, sales for 2013
increased by 1.2% from 2012. Sales increased as a result
of the acquisition of new customers, partially offset by lower
sales to existing customers. Sales of facilities and breakroom
supplies and, to a lesser extent, tablets and other mobile
technology increased, partially offset by lower sales of core
office supplies.
Business unit income as a percentage of sales decreased
to 7.5% for 2013 from 8.4% for 2012, primarily driven by
investments in sales force and marketing expenses to drive
growth. These expenses were partially offset by lower costs
associated with legal settlements and incentive compensation.