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By Stalking Staples With a Camera, It's Clear the End Is Near

NEW YORK (TheStreet) -- When analyzing any retailer before going live with a buy, sell, or hold recommendation, I find myself asking this one key question nowadays:

  • Does XYZ company sell a product or service that will require hundreds (sometimes thousands) of giant stores to operate as is the case at present? If not, do baby-boomer retail execs obsessed with stores get the pressing need to close hundreds of stores today as to survive profitably in an era favoring the likes of Amazon (AMZN) and even Walmart's (WMT) same-day delivery aspirations?

The latest horrid quarter from the combined Office Depot/Office Max (ODP) ultimately has caused this piece on Staples (SPLS - Get Report). As background, Staples is a perpetually restructuring company that I have analytically stalked for well over a year. In fact, here is a fun piece on CNBC I had the opportunity to pen last year, and a lively video on Yahoo Finance "Breakout" listing Staples as a retailer at risk of vanishing. To its credit, since each of those pieces hit, management at Staples launched its newest restructuring plan (when the fourth quarter results severely disappointed the market earlier in 2014) designed to make the company operationally smaller to delay the inevitable.

Unfortunately, I don't think the efforts by Staples will work, especially with an entrenched management team that refused to exit a poorly positioned international business and is compensated at year-end by sales of non-office supplies (explains why there is Tide Pods detergent positioned next to pens in an aisle).

But hey, don't take my word it. First, here are a few stats to chew on regarding Staples (pay special attention to the declining trend in annual free cash flow).

Must Read: Aetna, Cigna Owe a Big Thank You to Henry Waxman

Second, here is a tutorial from me to you from a Staples location utilizing the power of a phone camera. Enjoy!

Staples stores aren't so secretly stocked with consumable goods. Not Vined here: packages of beef jerky and a Burt's Bee cosmetics station at checkout.

I would estimate 25% of a Staples store is devoted to unproductive categories that should be online only, such as filing cabinets.

Staples continues to have issues with goods replenishment and merchandising (the latter an issue in electronics where display models are often missing).

By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

-- By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff. At the time of publication, Sozzi had no positions in Staples, although positions may change at any time.

At the time of publication, Sozzi held no position in the stocks mentioned.

Brian Sozzi is the CEO and Chief Equities Strategist of Belus Capital Advisors. He is responsible for developing and managing an equities portfolio of mid- and large-cap positions, in addition to leading the firm's digital content initiatives. He is also a personal finance columnist for Men's Health magazine.

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