Staples 2012 Annual Report Download - page 3

Fellow Shareholders,
During 2012, Staples achieved sales of $24 billion, healthy margins,
and solid free cash flow. We also remained committed to returning
excess cash to our shareholders and returned $743 million through
dividends and share repurchases. While our results were stable, they
came in short of our expectations. We’re not satisfied and we have to
do better.
Today, businesses of all sizes continue to rely on Staples, just as
they have for decades. However, what businesses need from us and how they buy from us have
changed. Customers that once only needed paper, ink and toner now need tablets, smartphones,
services, and expertise to help them succeed. Customers that once only shopped in our stores now
want the convenience of mobile shopping and fast delivery.
At Staples, we see enormous opportunities in these changing customer needs. Over the past year, we’ve
been working hard to identify our best growth opportunities and build a strategic plan to aggressively
pursue them. The result is a simple vision: Every product your business needs to succeed.
During 2012, we announced several significant changes to accelerate growth, reshape our business,
and better meet the needs of our customers. Our growth plans include four key priorities. First, we’re
expanding our assortment with new categories and building a marketplace to establish Staples as the
single-source product authority for businesses. This growth priority is in response to feedback from our
customers, who tell us they wish Staples offered more products. Facilities and Breakroom is a great
example of our ability to drive rapid growth in a category beyond office supplies. A few years ago, we
expanded our offering, lowered our prices, and invested in training. As a result, we drove double-digit
growth and generated $1.8 billion of global sales in this category during 2012.
Our second priority is to accelerate growth in our online business. Staples is already one of the world’s
largest Internet retailers with over $10 billion of annual online sales, giving us a strong foundation to build
on. We’ve significantly increased investment in this area over the past few years. We’ve improved the
functionality and user experience of our website, evolved our digital marketing strategies, and lowered
prices in key categories to drive demand. In 2012, we also launched an eCommerce innovation center
in Cambridge, Massachusetts with a team focused on developing and enhancing our eCommerce and
mobile commerce capabilities.
Third, customers have told us they want increased flexibility and consistency. We have already launched
many omni-channel capabilities, including in-store kiosks, an award-winning mobile website, a website
customized for tablets, and the ability to pick up online orders in our stores. But we’re going much further,
and much faster. A few months ago, we combined our North American Retail segment and Staples.com
to reorganize around our customers and create a seamless experience that will allow them to shop how
and when they want.
Fourth, we’re accelerating the growth of product-related services. Copy & Print and Technology Services
are great examples where we’re building critical mass. Over the past few years, we’ve taken action to
differentiate our service offering. We’ve remodeled stores, invested in training and quality, added a Copy
& Print sales force, expanded our assortment, and simplified our technology services offering. As a
result, we’ve achieved sustainable top-line growth in both of these high-margin businesses. To build on
our momentum, we’re improving cross-channel coordination, better aligning around our customers, and
increasing investment to accelerate growth.