Staples 2015 Annual Report Download - page 3

Fellow Shareholders,
At Staples we help businesses
succeed. This vision guides us in
everything we do. In 2015, the Staples
team continued to evolve to meet the
changing needs of our customers –
from the home office to the global
enterprise. We grew in key categories beyond office supplies.
We achieved sales and earnings growth in North American
Contract and staples.com. We enhanced our copy and print
capabilities, and we improved our omnichannel offering. We
also improved efficiency and preserved profitability by reducing
costs, streamlining our organization, and eliminating excess
retail capacity. I’m proud of all we accomplished in 2015, but
we have more work to do to get back to total company sales
and earnings growth.
Growing Beyond Office Supplies
Today, Staples generates $21 billion in annual sales. More than
$10 billion of our revenue comes from categories beyond office
supplies. These categories drive our long-term growth. Over
the past few years we have increased our scale and credibility
beyond office supplies. We have also sharpened pricing. During
2015, we achieved solid growth in facilities supplies, copy and
print services, breakroom supplies, furniture, and promotional
products. This growth was offset by continued weakness in
business technology, ink and toner, and paper.
Driving Growth in North American Contract
In 2015, we made great progress transforming our North
American Contract business. Over the past few years, we’ve
responded to the changing needs of customers by adding
nearly 300 category specialists to drive growth beyond office
supplies. This investment drove double-digit growth in facilities
supplies, breakroom supplies, and promotional products during
2015. We also invested to improve the online experience for
customers by redesigning StaplesAdvantage.com, our
Contract website. The new site is faster, optimized for business
customers, and designed to sell categories beyond office
supplies. We also enhanced our mobile app to accommodate
the increasingly mobile workforce.
Balancing Sales and Earnings Growth in Staples.com
After two years of heavy investment in staples.com, we got
back to sales and earnings growth in 2015. We also improved
and simplified the customer experience with a redesigned
staples.com. The new site is built for computers, tablets, and
smartphones and offers improved search capabilities and a
more personalized experience. These improvements supported
increased customer conversion throughout 2015. We also
changed our marketing strategy in 2015, focusing on profitable
promotions with small business customers. While this change
was a headwind to staples.com sales, it was a key driver of our
increased profitability year over year.
Enhancing Copy and Print
Growing copy and print remains one of our top strategic
priorities. We see enormous opportunity to grow our share in
this highly fragmented market. In 2015, we grew copy and print
sales in stores and online in North America. Our copy and print
account managers continued to drive strong business customer
acquisition. We drove traffic to our stores and websites through
an expanded assortment and sharp pricing in categories like
signs, banners, and business cards. We’ve also seen good
momentum in services like shredding, shipping, and direct mail.
In 2014, we acquired PNI Digital Media, a software company
that improves our offering of personalized products and
provides an in-house capability to unify copy and print across
all channels. In 2015, we successfully integrated the PNI
platform into our copy and print business, and PNI technology
will improve the customer experience in stores and online while
accelerating sales and earnings growth.
Improving Our Omnichannel Offering
Over the past few years we have improved the customer
experience by bringing together the strengths of our retail stores
and websites to create an unmatched omnichannel offering.
In 2015, we drove double-digit omnichannel growth and
generated nearly $500 million of sales through our in-store
staples.com kiosks and our click and collect features like
Buy Online, Pick up in Store. We also enhanced the Contract
customer experience on StaplesAdvantage.com with the
addition of key omnichannel features like Print to Store and
Buy Online, Pick up in Store. Customers have embraced the
ease of our omnichannel experience, and we’re building on our
momentum. We are testing Ship from Store as a way to further
improve the customer experience, manage inventory more
efficiently, and position us for same-day delivery. Early results
are very encouraging and we plan to expand this capability
throughout 2016.
Reducing Costs and Streamlining Our Organization
The investments we’ve made to transform Staples have been
funded by aggressive cost reductions. At the end of 2015 we
wrapped up our two-year global cost reduction program. I’m
pleased to report that we exceeded our goal and achieved
approximately $550 million of annualized cost reductions. Over
the past two years we’ve reduced product costs, eliminated
expenses in our retail stores, achieved efficiencies in our supply
chain, and streamlined our European operations. We also
simplified our organization in late 2015, creating a structure that
will speed up decision making, reduce expenses, and provide
financial flexibility to continue investing in our best growth ideas
in 2016 and beyond.
Eliminating Excess Retail Capacity
We completed our two-year store closure program at the
end of 2015 as we evolved our retail network to meet the
changing needs of customers. Our initial goal was to close up
to 225 stores. We closed 242 stores in North America in 2014