Staples 2005 Annual Report Download - page 79

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STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
B-5
Store Activity
Stores Open
at Beginning
of Period
Stores
Opened
Net Stores
Acquired
Stores
Closed
Stores Open at
End of Period
2003 North American Retail........................... 1,300 67 — 9 1,358
2003 InternationalOperations......................... 188 17 — 4 201
2003 Total........................................... 1,488 84 — 13 1,559
2004 North American Retail........................... 1,358 77 — 9 1,426
2004 InternationalOperations......................... 201 11 49 7 254
2004 Total........................................... 1,559 88 49 16 1,680
2005 North American Retail........................... 1,426 99 — 3 1,522
2005 InternationalOperations......................... 254 8 — 4 258
2005 Total........................................... 1,680 107 — 7 1,780
North American Retail: Sales increased 8.6% in fiscal 2005 and fiscal 2004. Comparable store sales in North
America increased 3% in 2005 and 4% in 2004. Our growth in fiscal 2005 primarily reflects non-comparable store sales
for the net stores opened during 2005 as well as our comparable store sales. Our growth for 2004 primarily reflects our
comparable store sales growth and non-comparable store sales for the net stores opened during 2004. The increase in
sales also includes the positive impact of the Canadian exchange rate to the U.S. dollar of $120 million in 2005 and
$98 million in 2004. Our strong comparable sales growth in both 2005 and 2004 reflects positive performance in
computer peripherals, portable computers, our copy and print center business, office machines and digital cameras. Our
total sales growth in North American Retail in both 2005 and 2004 was also positively impacted by sales growth in ink
and toner.
Business unit income as a percentage of sales increased to 9.0% in 2005 from 8.2% in 2004 and 6.8% in 2003. The
increase in business unit income for both 2005 and 2004 reflects the continued positive impact of targeting our product
mix and marketing at more profitable small businesses and home offices, strong results in our copy and print center
business, our continued focus on higher margin Staples brand products and supply chain initiatives which lower the cost
of moving product from our vendors to our customers. The increase for both years also reflects continued improvements
in expense management, leveraging of fixed expenses on higher sales and our focus on customer service. We also
benefited from the positive impact of foreign exchange rates in both 2005 and 2004. Our 2005 results were partially offset
by planned investments for long-term growth including labor and marketing to grow our copy and print center business
and investments in our Chicago market entry. Going forward, we will continue to focus on our “Easy” brand promise,
customer service and our Staples brand products, as we believe that these are key to our success. We expect that we will
continue to expand our copy and print center business and enter new major markets as well as explore new growth ideas
including selling office products through other retail channels and developing innovative products.
North American Delivery: Sales increased 17.8% in fiscal 2005 and 13.4% in fiscal 2004. The sales growth in both
years reflects the increased productivity of our expanded Contract sales force, more efficient and targeted marketing
spend among our catalogs, web sites and retail stores and the continued success of our customer acquisition and
retention efforts resulting from improved service levels as well as increased penetration of existing customers.
Business unit income as a percentage of sales increased to 9.8% in 2005 from 9.0% in 2004 and 8.3% for 2003. The
increase for both years reflects our continued focus on higher margin Staples brand products, supply chain efforts
focused on improving our perfect order metric and lowering our reliance on wholesalers, continued increases in the
number of orders placed electronically, leveraging of fixed expenses on higher sales as well as more efficient and effective
marketing spend. Our 2004 results were partially offset by the increased investment in our Contract sales force. During
2006, we will focus on growing sales in all of our delivery businesses and continuing to improve profits through our supply
chain programs, penetration of existing customers and driving service improvements.