Staples pins growth on service offerings

As its core customers emerge from the recession, business is good again at Staples, allowing the company to focus on its growth plans.

"Five years from now, we'll be more focused on our delivery business, with a higher mix of technology, and sell more private-label products," Ron Sargent, Staples' chairman/CEO, told investors attending the 26th Sanford Bernstein Strategic Decisions Conference, which was webcast. "There will be more services in our mix, because there is not a lot of inventory and the margins are great. And we're going to grow internationally. We're on a glide path to do all that."

While this recession definitely hit the Framingham, Mass.-based retailer hard, he says he sees progress. "A year ago, we were probably doing badly in every aspect of our business," he says, joking about investment bankers who swiped office supplies from home to bring to the office.

"Small business -- our core customer -- felt it first, followed by medium-sized businesses, then large companies, in our delivery business. And we are emerging from the recession in that order, as well, as was true in the 2001 recession." The company announced a 4% gain in quarterly sales a few weeks ago, "and we are growing again. I don't see a fast, robust recovery, but it does feel steady even though it is choppy week to week."

That means the company will continue to expand its technology offerings. "We're already the third-largest reseller of computers, behind Best Buy and Walmart, but the problem with computers is that the more you sell, the more you lose -- you price them low and promote them heavily."

Right now, he says computers account for about 7 to 8% of its business. "Do I see it being 15%? No. I would rather be the place people come to fix their computers, or to buy things for their computers -- not the lowest-priced guy in town." Instead, he says the company is focused on its EasyTech services for businesses. "It is the fastest-growing business we have," he says.

It's also working to expand its copy and print division, and Sargent says the company has taken that department -- available in every store -- from the range of $300,000 per store to $450,000. He thinks it has the potential to go much higher. In addition, it is expanding its small-store concept -- about 3,000 square feet, with half the store devoted to print and copy services, and the other to high-volume office supplies.

"It's a very profitable model," he says. "And the market is very fragmented. Even if we never take another customer away from Kinko's/ Fed Ex, we could still grow, just because of all the mom-and-pop copy shops."