Staples 2003 Annual Report Download - page 3

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markets. We also enhanced our existing real estate portfolio by improving under-performing
stores and closing 33 stores that didn’t demonstrate the potential to earn an adequate return
on capital. We rolled out a differentiated store format, and remodeled 126 of our stores to
the new, customer-centric “Dover” model, leading the industry in keeping our stores fresh
and exciting. A quarter of our chain now features the new design. Perhaps most
importantly, we have begun to shift our culture from one based on tasks and transactions to
one based on customers, driven by our “Back to Brighton” customer service initiatives and
our new brand promise: we make buying office products easy.
North American Delivery:
Our North American Delivery business generated record sales, profits and returns as well as
outstanding customer service scores in 2002. Each of the three businesses that make up NA
Delivery — Staples Business Delivery, Contract, and Quill — surpassed the billion dollar
mark in annual revenues, and together increased sales by 13% and earnings by 29%
compared to the prior year’s results. Combined internet sales reached $1.6 billion for NA
Delivery, and approached $2 billion including the sales from our in-store internet access
points. Staples Business Delivery, our direct mail and internet business serving small
businesses, improved customer retention and increased its operating profit significantly. Our
Contract business delivered industry-leading profitability and acquired more than 10,000
new customers. Quill acquired record numbers of new customers while remaining the most
profitable business in Staples’ portfolio. We also acquired Medical Arts Press, a leading
direct marketer of specialized printed office products to healthcare practices. This strategic
addition to the Staples family creates a new growth platform by providing us the
opportunity to address a new market segment. Growing our delivery businesses faster than
our retail business brings the benefits of higher margins and returns and the Medical Arts
Press acquisition improves the profitability of our NA Delivery segment even further.
Europe:
In our European business, sales increased 31% and we delivered a modest profit,
representing a $10 million positive swing versus 2001. Our retail businesses in the United
Kingdom, Netherlands and Portugal all performed well, while our German retail operations
remain challenging due to the weak economy as well as poor execution. On the Delivery
side, we created an exciting new growth platform with the acquisition of a leading
European direct mail business with attractive growth prospects and strong operating
margins. This acquisition increases Staples’ global presence with access to four new
countries: France, Belgium, Spain, and Italy. We expect Europe to become an increasingly
important growth platform for us in the future.
All these shifts contributed to our strong financial results in 2002, but more importantly,
they have created a platform for sustainable, long-term performance for years to come.