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Retail Trends

Office Supply

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The office supply superstore was born in an era when merchants thought in terms of “category killers.” These were store formats whose merchandise offerings were narrowly edited to a few closely-related classifications, but with very deep selections for the consumer.

Leo Kahn developed the idea for Staples after seeing bulk displays of office supplies in warehouse clubs. Kahn, who died in May at the age of 94, co-founded the company with Tom Stemberg in 1985; it has been a leader of the Big Three office supply retailers since birth, and remains by far the largest.

Office Depot has shuffled along of late, and OfficeMax has gone through several identity crises. Some of the problems that plague these two chains have caught up with Staples.

Though both sales and earnings were up in this year’s first quarter compared with the first three months of 2011, things don’t look so good for the rest of the year. Staples lowered its 2011 expectations for this year, announced it will be opening fewer stores than originally planned and that an unspecified number of underperforming stores will be closed.

Staples’ struggles, combined with the lackluster performance of Office Depot and OfficeMax over a sustained period, have prompted some industry watchers to re-evaluate the future of the group. Aram Rubinson, an analyst for Nomura Securities, says the office supply sector “is fighting a secular battle for relevance”; Credit Suisse analyst Gary Balter believes “three players are at least one too many in this sector. Consolidation will be a necessity.”