First up is $8.7 office supply retailer Staples (SPLS - Get Report). Staples is the biggest office supply company in the world, with more than 2,000 brick-and-mortar stores in 23 countries. The firm also holds the No. 2 spot in e-commerce, behind only Amazon (AMZN) in terms of annual sales. Less consumer-facing is the firm's sprawling corporate delivery business, which adds up to 40% of the firm's total revenue.
Yes indeed, Staples' business expands far beyond its well-known big box stores. The acquisition of Corporate Express in 2008 was a game changer for Staples; it gave the firm the ability to deliver directly to businesses using its own transportation network, a strategy Amazon is only just starting to embark upon. Because switching costs are high for corporate buyers, Staples is able to acquire most of its customers' office supply spending and keep it.
Even though margins are typically low for big box retail, Staples has boosted profitability by rolling out new private label offerings. By selling its own line of more commoditized products like paperclips and pens, the firm is able to compete much better on cost than it could as merely a retailer.Over the years, Staples has kept balance sheet leverage low, with only $1.2 billion in net debt -- a reasonable amount for a firm with such a big retail footprint. Likewise, shares only trade for a 43% premium to book value. For comparison, Amazon's price to book ratio is nearly 12x higher. Even retail peer Best Buy (BBY) sports a P/B ratio that's nearly double. Combine that with a perennially high short interest ratio, and Staples looks like a worthwhile bargain name for 2014.