Staples: Here’s Why Stores are Dropping Now

In order to cut costs by $250 million a year, Staples (NASDAQ:SPLS) will be closing 60 plants worldwide. The largest office supply chain in the United States wants to return over $1 billion to shareholders in fiscal year 2012 through dividends and share buybacks. The buybacks may be related to rumors earlier in September that private-equity firms were looking into buying the company.

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“The office supply business has been under pressure for really the past several years since the recession,” said Telsey Advisory Group analyst Joe Feldman in an interview with Bloomberg. “It’s reliant on economic growth and small business formation, and we’ve seen a lack of both.” Staples is down 13.15 percent this year through yesterday, and down over 4 percent in morning trades on September 25.

Competitors OfficeMax (NYSE:OMX) and Office Depot (NYSE:ODP) have weathered the economic downturn more gracefully, up 65.85 percent and 18.55 percent respectively this year through yesterday. All three of the retailers are facing pressure from Amazon (NASDAQ:AMZN), but Morgan Stanley analyst David Gober thinks office supplies is an area that can hold out against e-commerce.

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