Staples Ready to Take on Amazon This Back-to-School Season

Staples will fight the online behemoth down to the last pencil and notebook for this important shopping season.
By Brian Sozzi ,

Amazon (AMZN) - Get Report  who?

That seems to be the stance of office supplies giant Staples (SPLS) , which will try to ride the wave of a summer rebound in consumer spending and better prices on notebooks and backpacks to achieve a decent back-to-school shopping season.

"We are certainly excited by how back to school is shaping up. I think consumers are in a very positive mode right now in terms of their purchases for back to school," Steven Matyas, president of North American Retail at Staples, told TheStreet in an interview.

When asked about the growing presence of Amazon in the office supplies market, Matyas shrugged off the impact to Staples from the internet juggernaut and pointed to the retailer's guaranteed best prices and broader product assortment online. Added Matyas, "I would say we are more competitive on price year over year, absolutely, especially this year."

From a macroeconomic standpoint, it's easy to find the source of Matyas' optimism on the back-to-school shopping season. May's consumer credit report showed revolving credit outstanding, notably credit cards, rose at a 2.97% annual pace. That brought revolving credit outstanding to its highest level since mid-2009. April showed a solid 1.7% increase April. Meanwhile, auto sales through June increased 1.5% to 8.65 million, surpassing last year's record of 8.5 million, said Autodata Corp.

To top it off, consumer confidence in July and August could receive a boost as stock markets hover around all-time highs. According to eMarketer, U.S. retail back to school season sales are seen rising 2.6% from the prior year to $828.8 billion. If achieved, it would mark an improvement from the 1.6% sales increase notched in 2015.

Where Staples may be too overconfident, however, is its current position in an office supplies market where Amazon, Walmart (WMT) - Get Report  and Target (TGT) - Get Report  are increasingly playing a bigger role. The effects of heightened competition for pens, paper, and notebooks has weighed more heavily on Staples of late, and has sent its stock spiraling lower by 41% over the past year.

Staples saw same-store sales at its more than 1,600 stores in the U.S. and Canada fall 4% in the first-quarter. Store traffic and average order size each declined 2%. Operating income for the North America stores segment fell 17% year over year to $62 million. Sales plunged by double-digit percentages in tablets and tech accessories, and declined by a low-single digit percentage in ink and toner.

On the plus side, Staples had some success selling furniture, office supplies, facilities supplies, and copy and print products.

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