Staples Still Bullish on Windows 8, But Warns It Needs Faster ‘Build’

"Black Friday has changed forever as far as stores are concerned,” said Demos Parneros, president of U.S. stores at Staples, on the company’s Q4 earnings call Wednesday. No longer one day, Black Friday has turned into “Black Friday Week” and has consumed the weekends before and after Thanksgiving weekend, he said. The results from the expanded Black Friday period at Staples last November were “better online, worse for stores,” Parneros said.

Consumer technology “continues to suffer” at Staples, Parneros said, saying digital cameras, software, peripherals and GPS devices are shrinking categories for the retailer. The expected pattern is for declining categories to “eventually go away” and for customers to move on to tablets and mobile phones, he said. PCs were “under pressure” in Q4, Parneros said, due to consumer interest in tablets and anticipation and build for Windows 8, which “really slowed things down,” he said. The Windows 8 release was “below what we expected,” Parneros said, and now Staples is hopeful about for the recently launched pro model, which has garnered “relatively good reviews and sales.” Touch product, which makes Windows 8 “a better experience, was scarce,” he said, and Windows 8 mobile phones were slow to market. “We believe in Windows 8,” Parneros said, “but it has to build a little faster."

Smartphone sales at Staples -- now selling through 500 U.S. stores -- have been “a little bit below … very aggressive goals, but are building nicely,” Parneros said. Hot phones drive successful sales cycles, he said, and plans call for expanding to 1,000 the number of Staples stores carrying phones. The retailer expects smartphones to be a “meaningful contributor” to sales and offer a “much better margin play than computers” but “not to the level of consumables such as ink,” he said. The smartphone ramp over the last 18 months has moved from partner relationships to Staples-staffed departments, he said.

Staples is beginning to sell Apple accessories this quarter, the company said, but no announcements have been made about selling Apple hardware in the U.S., although Staples sells Apple hardware in Canada and other parts of the world as well as through its commercial division, Parneros said. “No word on hardware at the moment,” he said, but the company is encouraged by early responses to Apple accessories.

Staples’ Q4 sales were $3.3 billion, up 3 percent compared with Q4 2011, but included $221 million of sales during the extra week of 2012, the company said. Excluding the extra week of sales in 2012, Q4 sales fell 4 percent versus the prior year. Growth in sales of tablets, e-readers, facilities and break room supplies, and copy and print services was offset by lower receipts from computers, digital cameras, and software, it said. Comparable store sales dropped 5 percent, on a decline in traffic, and order size was flat year over year, Staples said. Staples.com sales declined 1 percent during Q4 on softness in technology, Parneros said. During Q4, Staples shuttered 32 stores and opened one store in the U.S., it said. Staples shares closed down 7.2 percent on Wednesday at $12.34.