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    MARKET EDGES

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Takeaway: There is severe risk in Staples ($SPLS) “change everything” move.

Hedgeye's retail sector team says that Staples (SPLS) vast and sweeping restructuring plan, which the giant retailer unveiled earlier this week, looks incredibly risky. 

SPLS says it will do the following:

  • Integrate its online and retail offering
  • Increase investment in its online business
  • Reorganize its operations
  • Implement senior leadership changes
  • Start a multi-year cost savings plan
  • Restructure international operations 

Our team says that tackling one of the above items looks risky, but the fact that the company wants to do all of the items above means there is little chance that the company's plans will work - at least not with some more severe pain before it sees any relief.

For example, let's look at Staples' online business (see chart below). Online's contribution to the company's overall growth has slowed from 8% per year to only 2% per year in the last two years. Additionally, online sales topped out at 42% of overall sales each of the last two years. If the company spends now on its online operations, it means it will benefit two years from now, not today. 

Staples: Coming Unglued?  - spls