Staples reportedly laying off hundreds, but stays mum
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Staples Inc. is laying off hundreds of workers at its Framingham headquarters, a move that analysts said suggests the company is preparing for the likelihood its planned merger with Office Depot Inc. won't win regulatory approval.
The job cuts were confirmed by a current employee and a former employee, both of whom asked for anonymity due to job and severance concerns. Staples spokesman Mark Cautela would not comment on layoffs, pointing only to a press release issued Monday in which chief executive Ron Sargent said the company was "streamlining."
Staples efforts to merge with rival Office Depot, which would join the top two office supplies retailers in the country, has been thwarted by the Federal Trade Commission, which last month filed a lawsuit calling the deal anticompetitive. Last week, Staples and Office Depot said they would extend their expiring merger agreement until May, demonstrating their desire to complete a deal. Court proceedings could begin in March.
The opposition of the FTC is a high hurdle that few proposed mergers overcome, analysts say. The layoffs could be a sign that Staples' quest for the merger is waning — particularly since it faces a potentially long and expensive court fight — and that it is cutting costs to become more competitive, said Oliver Wintermantel, a Staples stock analyst with Evercore ISI, a New York strategy and investment group.
"They might be preparing for life after Office Depot, if the merger doesn't go through," he said. "It could give you a better starting position to compete with Office Depot."
Staples' Monday press release disclosed only the resignation of Demos Parneros, who ran the company's North American Stores and Online division for 28 years, and other management changes. It made no mention of layoffs, which were first reported by Fortune magazine.
Staples has faced competition from Walmart Stores Inc., Target Corp., and online retailers, and it has also seen its revenues decline. Sales for the third quarter were $5.6 billion, down 6 percent from the third quarter of 2014.
Since 2011, the company's annual sales have declined 9 percent, to $22.5 billion from $24.7 billion. Over that period, the company has cut its full-time workforce by 16 percent, to 44,400 from just under 53,000, according to filings with the Securities and Exchange Commission. Staples shares rose 13 cents Tuesday to close at $8.81. The stock, however, is down more than half from its 52-week high of $19.40
Staples wants to merge with rival Office Depot because it is losing market share to new competitors, such as Amazon.com, analysts said. Charles Kane, a senior lecturer in international finance and entrepreneurial studies at the MIT Sloan School of Management, said the layoffs at Staples are necessary even if a merger attempt fails.
"I think it's bad news, more bad news unfortunately for Staples," he said. "They're in a very difficult market space competing with all kinds of new players. It sounds to me like this merger is more of a desperate thing."
Staples also laid off employees in September 2013, saying only that it had eliminated a number of US jobs, most of them leadership positions at its corporate headquarters. Staples at the time refused to provide details, including how many people had been laid off.