Staples Company Overview Staples Inc.

¶ … Staples

Company Overview

Staples Inc. is the world's largest supplier of office products. Trusted source of office product, the company is a specialist in office supplies, furniture, copy & printing, technology, facilities and break-room. Presently, the company has annual sales of more than $25 billion and ranked second in the eCommerce sales. With more 88,000 associate worldwide, Staple Inc. operates in 27 countries throughout North America, Europe, South America, Australia, and Asia. The company opened its first product superstore in Brighton at Massachusetts in 1986 to serve the business needs across the United States. With the success that the company has achieved over the years, Staple Inc. is currently serving small businesses and individual consumers in North America, Australia, Europe, Asia and South America. (Staple Annual Report, 2011).

The success of Staple Inc. lies on the superior business strategy that the company has implemented over the years. The company provides superior value to customer by offering high quality product at low price. The company also uses wide range of technology to produce high quality and innovative brand product and deliver at fair price. The convenient location, excellent customer service, easy to use web sites, fast and reliable order delivery service has made Staple to differentiate itself in the industry.

The company plan is to accelerate growth. To achieve this objective, Staple Inc. is increasingly investing in online and mobile capabilities that would assist the company to differentiate itself as well as offering multi-channel shopping experience for its customer. Moreover, the company is embarking on the multi-year cost saving plan that would assist the company to save approximately $250 million at the end of the 2015 fiscal year. The company's future goal is also to restructure its international operations. The process is to reduce complexity as well as increasing the profitability of its European business operations.

Using the MDA (Management Discussion and Analysis), and the company financial statements, the paper provides the analytical results of the company financial conditions.

Review of Staple's MD & A and Financial statements

This section discusses the numerous financial aspects of management discussion and analysis of the Staple Inc. Typically, the company MD&A provides the overview of the 2010 business operations compared to 2011 business operations. The analysis enhances the greater understanding of the company financial improvement during the periods.

Staples Inc. announced on January 30, 2010 its Financial Statement and Management Discussion Analysis for the end of the 2011 fiscal years. The result of the operations reveals that the Staple generated $25.02 billion in sales at the end of the 2011 fiscal year revealing the increase of 1.9% sales growth to the 2010 fiscal year. In North American segment, the company sales increased by 2.1% between 2010 and 2011 and the company business income rate also increased from 8.5% to 8.7%. The retail sales of the North American segment also increased to 1.4% and business income rate increased from 8.1% to 8.3%. The company international operations also increased by 27%. However, the business unit income of the company decreased from 3.2% to 1.8% between 2010 ad 2011. Moreover, the company annual income tax declined from 34.5% to 32.6%.

Staple continues to invest in the strategic initiatives to drive long-term success, which include "technology products and services, copy and print services, and facilities and break-room supplies, while maintaining focus on customer service and expense control." The 2011 financial results reflect the company investments in these initiatives. (Staples, 2011 PB-1). Based on the present U.S. economy and current international economic condition, Staples assumes that the demand for office supply in the international market will remain soft, primarily in the European market. However, the company will continue to invest in the adjacent categories to accelerate growth as well as meeting customer's demand. The company also plans to control costs on product and service offering as well as levering the leadership position.

Comparative analysis of the company financial position of 2010 with 2011 reveals that the company's net income was $984.7 million in 2011, compared to $881.9 million in 2010. Moreover, the company recorded $1.40 per diluted share in 2011 compared to $1.21 in 2010. The company's sales in 2010 were $24.5 billion and increased by 1.1% between 2009 and 2010. The gross profits also increased by 26.9% for 2010 compared to 27.6% in 2009. The increase in the gross profit was primarily driven by supply chain efficiencies and improvement in gross margin. The company also incurred 20% in sales expenses in 2010 compared to 20.2% sales expenses in 2009. The company also recorded $57.8 million for the integration and restructuring costs in 2010 compared to $84.2 million in 2009.

The report discusses the company inventory turnover to enhance greater understanding on how the company quickly sells its inventory.

Inventory Turnover (TTM)

The inventory turnover measures how quickly Staple has been able to sell out its inventory in a given fiscal year. The formula to calculate inventory turnover is as follows:

Inventory Turnover = "Cost of goods sold / Average Inventory." On the other hand, inventory turnover ratio measures the company ability to sell its inventory within a short period. Declining ratio reveals that a company's inventory is building up. The report reveals the following formula to calculate the Staple Inc. inventory turnover ratio:

Inventory Turnover Ratio: = (Sales / Inventory) or (Cost of Goods Sold / Inventory).

In 2010, Staple Inc. recorded 9.66 in the inventory turnover. However, in 2011, the company inventory to sale ratio for total sales was 9.85, and declined to 9.78 in 2012. On the other hand, the company inventory ratio in 2011 was 7.2 and was 7.17 in 2012. The company inventory Day Sales is 0.02 in 2012. (Table 1 and Table 2 reveal the Staple Inventory turnover ratio and Inventory to Sales Ratio) With the current inventory ratio data, the company is ranked third in the industry and ranked 9th in the sector.

Table 1: Inventory Turnover Ratio

(Nov. 3, 2012)

(Aug. 3, 2012)

(May 01, 2012)

(Feb. 3, 2012)

(Nov. 3, 2011)

Y / Y Inventory Growth

Y / Y Cost of Sales Growth

Inventory Turnover Ratio (TTM)

7.17

7.15

7.19

7.16

7.2

Total Ranking

# 149

# 166

# 163

# 160

# 170

Average inventory processing period

51

51

51

51

51

Seq. Inventory Growth

Seq. Cost of Sales Growth

13.02%

10.7%

Table 2: Staple Inc. Inventory to Sales Ratio

(Nov. 3, 2012)

(Aug. 3, 2012

(May 01, 2012)

(Feb. 3, 2012)

(Nov. 3, 2011)

Y / Y Inventory Change

Y / Y Sales Change

Inventory to Sales Ratio (TTM) Sales

9.78

9.76

9.84

9.8

9.85

Overall Ranking

# 185

# 214

# 213

# 216

# 222

Seq. Inventory Change

Seq. Sales Change

15.54%

12.89%

Receivable Turnover Ratio

Receivable turnover ratio measures a company's ability to collect credit or loan (Account Receivables) that it has provided to customers). High ratio rates indicate that a company has been able to efficiently collect its outstanding receivables.

Formula = (Revenue / Receivables)

The receivable turnover ratio of Staple Inc. improved to 12.63 below the company average. However, the average receivable collection period decline to 29 in November 2012. Within the Retail sector, 26 companies records higher receivable, however, Staple Inc. is ranked seventh within the industry and achieve 27th position in the sector. Table 3 reveals the Staples Inc. Receivable turnover ratio. The data reveals that the company receivable ratio increases from 12.45 in 2011 to 12.63 in 2012. However, the average collection period remains the same in 2011 and 2012. (See Table 3).

Table 3: Staples Receivables Turnover Ratio

(Nov. 3, 2012)

(Aug. 3, 2012)

(May 01, 2012)

(Feb. 3, 2012)

(Nov. 3, 2011)

Y / Y Receivable Change

-10.95%

Y / Y Revenue Change

Receivable Turnover Ratio (TTM)

12.63

12.37

12.36

12.35

12.45

Total Ranking

# 108

# 134

# 131

# 127

# 125

Average receivable collection period

29

30

30

30

29

Seq. Receivable Change

Seq. Revenue Change

15.54%

12.89%

Current Asset and Current Liabilities

The paper also computes the working capital using the current assets and current liability. The current assets are the assets that the company could turn into cash with 12 months, while the current liabilities are the short-term obligations that the company should settle within 12 months. The current assets of Staple Inc. include cash and cash equivalent, inventory, short-term investment, restricted cash, assets held for sales etc. The company total current assets in 2011 are $6.33 Billion. However, the company total current assets declined to $6.08 Billion in 2012. The company current liabilities include Short-term debt and the company current liabilities declined from $4.2 billion in 2011 to $3.7 billion in 2012. Thus, the company working capital increased $2.12 Billon in 2011 to $2.2 Billion in 2012. (See Table 4).

Table 4: Staples Current Asset & Current Liabilities (millions $)

(Nov. 3, 2012)

(Aug. 3, 2012)

(May 01, 2012)

(Feb. 3, 2012)

(Nov. 3, 2011)

ASSETS

Cash & cash equivalent

1,020.04

1,204.52

1,264.15

1,060.36

Cash, Cash eqvivalents other

Short-term investments

Marketable securities

Restricted cash

Cash & Shortterm Investments

1,020.04

1,204.52

1,264.15

1,060.36

Accounts receivable

1,892.39

1,855.93

1,953.50

2,033.68

2,125.03

Other receivables net

Net Receivables

Inventories

2,417.37

2,629.60

2,502.83

2,431.84

2,526.98

Assets held for sale

Discontinued operations

Other current assets

Income Taxes

Prepaid expenses

Subtotal

5,063.31

5,137.28

5,041.29

5,026.67

5,274.03

Total Current Assets

6,083.35

6,121.94

6,245.81

6,290.82

6,334.40

LIABILITIES

Accounts payable

2,170.42

2,236.14

2,194.42

2,220.41

2,337.33

Accrued liabilities

1,326.44

1,198.68

1,274.71

1,414.72

1,437.94

Compensation

Shortterm debt

Other current liabilities

Income & other taxes

Deferred income

Cash dividends payable

Total Current Liabilities

3,759.82

3,933.80

3,907.24

4,074.28

4,205.46

Working Capital

2.223.83

2.128.94

As being revealed in Table 5, the working capital ratio from 1.53 in 2011 to 1.58 in 2012 revealing the company is growing strong in term of its working capital.

Table 5: Staples Working Capital Ratio

Nov. 3, 2012

Aug. 3, 2012

May 3, 2012

Feb. 3, 2012

Nov. 3, 2011

Y / Y Current Liabilities Growth

-10.6%

Y / Y Current Assets Growth

Working Capital Ratio TTM