Staples pulls PCs
Shifts to build-to-order as demand falls
October 5, 2001: 7:40 p.m. ET
NEW YORK (Reuters) - Staples Inc., the nation's second largest office supply retailer, said on Friday it has begun liquidating stock of personal computers at its U.S. stores and will now focus on built-to-order sales in a bid to boost profitability.
Staples -- which along with other sellers and makers of personal computers has seen sales dwindle as the U.S. economy stumbles -- said 200 of its stores stopped stocking up on built-up personal computers on Sept. 15.
"Eventually we will raise that number to 400 stores," Staples spokesman Tom Nutile said. The next 200 stores are expected to have completed inventory liquidation by the end of the company's fourth quarter in January 2002, he told Reuters.
Nutile said the move was part of the company's bid to refocus on small business customers, who want computers configured to their own specifications and are a good stream of revenue.
"Stocked computers are a relatively low margin category for us and they do take up valuable shelf and stockroom space which we could use for other products," he said.
Nutile said the pre-built computer business was facing "pretty much a slowdown". "We do expect that this step will obviously contribute to the bottom line," he added.
He said the build-to-order segment will carry machines from Compaq Computer and Hewlett-Packard Co. The two names have also featured in the pre-built inventory that is now being pulled off the shelves.
Personal computer sales have been on the decline and after years of strong growth are expected to decline in 2001 from last year as consumer demand fails to materialize.
Retail margins are so thin that International Business Machines no longer sells PCs in retail stores.
Computer makers that sell at retailers like Staples also include Gateway Inc. Compaq and Gateway have been struggling with thin margins as No. 1 personal computer maker Dell Computer Corp has waged a price war, made possible by selling directly to customers.
Analysts said while the move will have long-term benefits for Staples, it will also benefit the nation's largest retailer of consumer electronics Best Buy Co.
"What these trends suggest is that as other specialty retailers focus on their core competencies there will be a reduction in competition for Best Buy," Peter Caruso, an analyst at Merrill Lynch said.
"That should further enhance its position as the dominant destination store for technology," he added in a research note.
Staples has more than 1,300 office superstores, mail order catalogs, e-commerce and a contract business. Its shares closed on the Nasdaq stock exchange up 2.34 percent or 33 cents at $14.41 on Friday. |
