Staples nailing down the office-supply market Six-year-old chain performing well even though it is growing rapidly.

August 14, 1991|By New York Times

NEWTON, Mass. -- Staples Inc., the six-year-old office-supply chain, is growing rapidly. From 34 stores at the end of the 1990 fiscal year, it has 105 now, and intends to have 124 by the end of the 1992 fiscal year, which ends Jan. 31. But analysts say it has the situation well in hand.

"Staples has the greatest growth potential of any retailer that I follow," said Christopher Vroom, an analyst with Alex. Brown & Sons in Baltimore. Vroom predicted the stock, which lost 25 cents Tuesday, closing at $19.25 a share in over-the-counter trading, will be selling at $28 to $30 within a year.

The frenetic expansion, especially in California, has had costs, to be sure. The company earned $3.66 million on revenues of $299 million in the 1991 fiscal year, but analysts expect Staples to report a quarterly loss Wednesday equal to 6 cents a share.

Still, with the new California stores already generating good sales and the company expecting total revenues of $550 million this year, analysts remain bullish.

"We're expecting an annual earnings growth rate of 40 percent over the next five years," said Margo McGlade, a retail analyst with Paine Webber. "The stock is an excellent long-term investment."

Staples is currently the second-largest such retailer, behind the Office Depot Inc., based in Boca Raton, Fla., with more than $1 billion in revenues. But Vroom of Alex. Brown said Staples was better positioned than Office Depot for the long term.

"Staples has put together a much better store format," he said. "In five to seven years, I expect them to be a $2.5 billion to $3 billion company."

Despite its current expansion mode, company president Henry J. Nasella said Staples was not interested in operating in all 50 states. Rather, it wants to saturate its major markets in the Northeast and California.

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