EB: Q2 reseller review

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As we await Staples’ second quarter results later this week, how have the other main players in the US market been doing? opi.net takes a look back at their recent results.

 

Staples has consistently outperformed its two main big box rivals, Office Depot and OfficeMax, during the economic downturn and there is no reason to suggest that Thursday’s Q2 results from the world’s number one office supplier will change that pattern.

 

Both Depot and ‘Max saw Q2 sales fall in all their operating divisions, although there was an improvement in profitability as cost savings kicked in, while margins at ‘Max were also boosted by better-than-expected inventory shrink levels.

 

In the US retail sector, same-store sales were once again negative, Depot down by 1 percent and ‘Max by just over 2 percent.

 

Recent point-of-sale data from research firm NPD indicates that retail sales of core office supplies at the three big boxes was flat during the second quarter, while furniture sales were down by 3 percent. Sales of the all-important laser toner and inkjet category increased by just under 2 percent (although this figure includes other retail chains, too).

 

Given the general sluggishness of the US retail sector – Walmart today reported a same-store sales decrease of 1.8 percent – the declines at Depot and ‘Max certainly don’t stand out, and it will be interesting to see if Staples can maintain the positive retail comps that it has achieved over the last two quarters.

 

On the commercial side declines were larger, with ‘Max’s US contract sales down 3.6 percent and Office Depot’s BSD recording a 6 percent drop in sales.

 

‘Max said that its Q2 sales grew in its vertical healthcare and education markets, and furniture also grew year on year. Looking ahead, the contract division will benefit from the agreement with retailer Food Lion that will see OfficeMax branded products in over 1,300 Food Lion stores and ‘Max says that it is negotiating similar agreements with other regional retailers.

 

Meanwhile, Depot continues to face serious challenges in its contract division. The 6 percent decline was greater than the company had expected and, with direct sales almost flat that means that contract sales were down by more than the overall 6 percent figure, despite Depot saying that it had signed up more than 2,000 new accounts during the quarter. There is still a great deal of uncertainty surrounding the company’s claim that it can hold on to the majority of its US Communities business via its new TCPN contract and dealing directly with public agencies, and its previously exclusive contract with the State of Florida is changing to a multi-vendor contract that also includes Staples and AOPD independent dealer Gulf Coast.

 

The B2B market is still being hampered by unemployment in the US – there was a net loss of over 130,000 jobs in the US in July – and recent surveys indicate a pessimistic outlook for the rest of the year in the small business sector. Figures out today at Sam’s Club show that same-store sales edged up by 1 percent, and last quarter Staples’ own North American Delivery sales were flat.

 

Interestingly, quarterly results from both US national wholesalers, United Stationers and SP Richards, would suggest that the independent dealer community is performing better than its big box rivals.

 

Even though its overall sales fell by 1 percent in the second quarter, SP Richards said that sales to its independent customers were up in the low single digits, compared to a low double-digit decrease in sales to its major accounts.

 

There was an even greater percentage spread at United, where year-on-year sales to independents grew by over 8 percent in the quarter, while big box sales decreased by 9 percent.

 

Some, but not all, of these differences can be attributed to more direct imports and direct purchasing from manufacturers by the big boxes, and price inflation, but the figures do suggest that independent dealers are more than holding their own.

 

During Staples’ conference call on Thursday, we may get an idea of how the back-to-school season is shaping up on the retail side, but the real interest will be in Staples’ US contract business, especially with its government/public agency contracts.

We’ll bring you an in-depth report on Staples’ Q2 results on Friday.