Staples' Expansion Plugs on Through Recession

(MoneyWatch)  Office-supplies leader Staples is opening new stores in the face of the recession, at a time when many other large retail chains are cutting back their expansion plans. And surprisingly, there are still several markets the Framingham, Mass.-based company needs to penetrate before gaining a true national reach, executives said recently.

Staples, with 1,872 units across the country, is close to opening 50 new stores this year and plans to do the same in 2010. Since the beginning of last year, the retailer opened stores in nine new significant markets: Austin, Tex.; Houston; Kansas City, Mo.; Las Vegas; Minneapolis; Omaha, Neb.; San Antonio; and Tucson. It also opened its first store in Louisiana.

And there are more new metro areas to follow, said Ron Sargent, Staples' chairman and chief executive officer, during its third-quarter conference call. "We still don't have a single store in about 10 of the top 100 U.S. markets, and we plan to go after those markets," he said.

Staples will also open stores in markets it already occupies. Sargent said the company will further penetrate those areas by opening stores in different formats to gain market share. Much is that is taking place with its smaller-format Staples Express stores so that it can fill in urban areas.

Staples' moves are in contrast to those of competitors Office Depot and OfficeMax. The 1,144-unit Depot actually closed 117 stores in the year leading up to the end of its third quarter, while OfficeMax, with 1,010 locations is only opening 12 stores for the full year and is closing 25. And while both of those two posted weak earnings (Office Depot's loss was actually at $413 million) and deep sales slides during their third quarters, Staples stores open at least a year recorded flat sales, and net earnings shot up 72 percent, to $269 million.

So Staples is the leader in its retail sector that is growing at a faster rate than its competitors and performing better financially. In an industry where one player seems to dominate any one big-box category, such as Best Buy or Bed Bath & Beyond, it's not too surprising.