Staples 2012 Annual Report Download - page 103

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B-7
STAPLES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
(Amounts in thousands) 2012
% of Sales 2011
% of Sales 2010
% of Sales
Business Unit Income: 2012 2011 2010
North American Stores &
Online $ 987,025 $ 1,021,442 $ 965,089 8.3 % 8.7% 8.4%
North American Commercial 680,011 660,822 646,462 8.4 % 8.3% 8.2%
International Operations (21,146) 103,329 176,442 (0.5)% 2.1% 3.7%
Business unit income $ 1,645,890 $ 1,785,593 $ 1,787,993 6.8 % 7.2% 7.4%
Store
Activity
Stores
Open at
Beginning
of Period Stores
Opened Stores
Closed
Stores
Open at
End
of Period
2011 North American Stores & Online 1,900 31 14 1,917
2011 International Operations 381 6 9 378
2011 Total 2,281 37 23 2,295
2012 North American Stores & Online 1,917 17 48 1,886
2012 International Operations 378 7 56 329
2012 Total 2,295 24 104 2,215
North American Stores & Online
2012 Compared with 2011
Sales increased 0.7% for 2012 compared to 2011. Sales for 2012 include $221.4 million of revenue related to the additional
week in 2012. Excluding the additional week, sales for 2012 decreased by 1.2% from 2011. This decrease was driven by a 2%
decline in comparable store sales and, to a much lesser extent, the negative impact of foreign exchange rates of $9.6 million, partly
offset by growth in Staples.com and non-comparable sales for new stores opened in the past twelve months. The decrease in sales
reflects declines in technology accessories, software and computers. These declines were partially offset by growth in tablets and
other mobile technology, facilities and breakroom supplies and copy and print services. The decline in comparable store sales
reflects a decrease in customer traffic and flat average order size.
Business unit income as a percentage of sales decreased to 8.3% for 2012 from 8.7% for 2011. The decrease was primarily
driven by unfavorable product margins, increased labor expenses, and investments to optimize our pricing, profit improvement
and sourcing strategies. These expenses were partially offset by a reduction in incentive compensation and marketing expense.
In 2012, North American Stores & Online recorded the following charges which are excluded from the definition of
business unit income:
Restructuring charges of $30.0 million for contractual lease obligations, severance and other associated costs primarily
related to the accelerated closure of 15 retail stores in the United States.
Long-lived asset impairment charges of $5.1 million related to the write-down of fixed assets in connection with the
closure of the 15 retail stores.
2011 Compared with 2010
Sales increased 1.7% for 2011 compared to 2010. This increase was the result of the positive impact of foreign exchange
rates of $81.1 million and non-comparable sales for new stores opened in the past twelve months. The sales increase reflects
positive performance in laptops, tablets and e-readers, partially offset by a softness in digital cameras and computer media.
Comparable store sales were flat, reflecting a decrease in customer traffic, offset by an increase in average order size.
Business unit income as a percentage of sales increased to 8.7% for 2011 compared to 8.4% for 2010, primarily reflecting
improved product margins and reduced rent and occupancy costs, partially offset by investments in marketing and labor to drive
new initiatives.