Staples will close up to 225 stores in North America by the end of next year as half of its sales have moved online.
The largest U.S. office-supply retailer said Thursday that it seeks to trim about $500 million in costs annually by 2015 and it plans to aggressively cut costs to become more efficient.
Company shares dropped more than 10 per cent before markets opened and at mid-morning was trading at $11.41 US, down 15 per cent.
The recession did heavy damage to the industry, which is now under increasing pressure from online retailers as well as discount stores.
There is rapid consolidation under way and rivals Office Depot and OfficeMax just completed a $1.2 billion merger.
But the overhead costs of running 'big box" stores has put companies like Staples under stress. Staples has closed dozens of stores in the past year.
The closings amount to 10 per cent of all Staples locations. The company has 2,200 stores worldwide, 1,846 of them in the United States and Canada.
Sales dropped in 2013
Staples would not elaborate on the number of jobs that are being cut, nor the locations of stores that will close.
Chairman and CEO Ron Sargent said Thursday that his company wasn't giving up on brick-and-mortar stores, believing that customers still want the convenience and service that they can get there.
"That said, stores have to earn the right to stay open," Sargent said. "We are committed to making tough calls when it's necessary."
Staples also posted fourth-quarter earnings today and reported its sales fell sharply.
The company's earnings nearly tripled, but that is compared to a period when it booked $176.6 million in restructuring charges as it closed stores.
Staples earned $212.4 million US, or 33 cents per share, in the quarter that ended Feb. 1. That compares with earnings of $78.1 million US, or 12 cents per share, the previous year.
Revenue slumped nearly 11 per cent to $5.87 billion.
Sargent said no one is happy with the company's performance.
"It's clear we underestimated the headwinds we are facing in our retail stores as well as demand for core office supplies," he said.
Both revenue and profit fell short of Wall Street expectations, as did the company's outlook for this quarter.
Staples expects sales to fall again and it projected earnings of between 17 and 22 cents per share. Analysts that follow the company had been looking for something closer to 27 cents per share.
Staples shares fell $1.35 to $12.05 in premarket trading. That price would set a new 52-week low during regular trading.