Retail · Deep dive

Staples, Inc.

The superstore that invented the office-supply category, now a Sycamore Partners LBO stripped to its US retail-and-B2B core — a shrinking store fleet bolted to a durable contract-delivery franchise, carrying a wall of high-coupon debt into a market in secular decline.

at risk

A genuinely useful B2B contract-distribution franchise is trapped inside a private-equity capital structure and a secularly declining category, and every refinancing at double-digit coupons transfers more of the franchise's cash flow to creditors instead of reinvestment.

My take ★★ Very interesting ★ Interesting − Maybe ✗ Not interesting

Snapshot

Staples invented the office-supply superstore in 1986 and, for a generation, defined the category. Today it is something narrower and more precarious: a Sycamore Partners leveraged buyout, taken private in 2017 for about $6.9 billion, then carved into three separately financed pieces. The entity that still carries the Staples name in the US is a shrinking retail fleet — roughly 900 stores in early 2026, down more than 40% from its peak — bolted to a genuinely valuable business-to-business contract-delivery operation, Staples Business Advantage, that now generates the majority of revenue. It matters now because the crux is a race: a durable B2B distribution franchise trying to outrun two forces working against it — the secular decline of office supplies (US category sales fell ~5% to ~$11.5B in 2024, per trade tallies) and a private-equity capital structure that has been refinanced repeatedly at rising, now double-digit, coupons.

Founding story

Staples began with a printer ribbon Tom Stemberg could not buy. A supermarket executive frustrated by a closed local dealer on a 1985 holiday weekend, Stemberg saw that office supplies were sold the way groceries had been before the supermarket: through small, high-priced, low-selection dealers. With fellow grocery veteran Leo Kahn backing him, he opened the first office-supply superstore — 14,000 square feet, warehouse decor, shopping carts, six registers — in Brighton, Massachusetts in May 1986. The model was pure grocery logic applied to a new category: enormous assortment, aggressive private label (launched 1989), and low prices that transformed the economics of buying supplies. A case of copy paper that cost ~$65 in 1986 cost ~$23 two decades later, largely because of the superstore war Staples started.

The company went public in 1989, raising ~$37M, and rode the superstore boom into a multibillion-dollar chain and a duopoly with Office Depot. But the ownership arc that defines Staples today is the ending. After a failed 2015 attempt to merge with Office Depot — blocked by the FTC in 2016, forcing a $250M breakup fee — Staples put itself up for sale. In June 2017, Sycamore Partners, the retail-focused firm run by Stefan Kaluzny, agreed to take it private for ~$6.9B, or $10.25 a share. Crucially, Sycamore’s own equity was only ~$1.6B; the rest was debt loaded onto the company. The deal closed in September 2017, and Staples has been a private, leveraged entity ever since.

How it works

Two very different machines share one brand. The retail machine is the legacy: superstores where walk-in customers and small businesses buy supplies, technology and print/marketing services, plus a growing menu of third-party services (TSA PreCheck, passport photos, Verizon tech, in-store Stanton Optical eye care) meant to fill space and traffic. Each store is a fixed-cost box in a category with declining foot traffic, which is why the fleet keeps shrinking.

The delivery machine — Staples Business Advantage — is the real franchise. It works like a B2B distributor: enterprises, government agencies and SMBs sign contracts, order through dedicated portals and account managers, and Staples fulfills from distribution centers with owned and partnered delivery, targeting same-day service to 85% of major US metros by 2026. Revenue is recurring and buried in multi-year contracts rather than exposed to daily retail whims. Behind both sits a supply chain Sycamore deepened by acquiring Essendant, the largest US office-products wholesaler, in 2019.

Product and business overview

Staples Business Advantage (B2B contract delivery). The core. Contract distribution of office supplies, technology, furniture and, increasingly, adjacent categories to enterprises, SMBs and the public sector. By trade estimates it now accounts for the majority — reportedly 60%+ — of enterprise revenue, with recurring contract sales.

US retail stores. ~900 locations in early 2026 (about 929 in October 2025 falling to ~916 by January 2026, per store-closure tracking), down sharply from peak. Supplies, print & marketing services, tech, and a growing menu of third-party services to defend the box.

Private label and own-brand. A high-margin lever dating to 1989; Staples-brand supplies undercut national brands and improve mix in both channels.

Category expansion (“worklife”/facilities). The strategic bet: move beyond pens and paper into breakroom, cleaning/janitorial, facilities, packaging, and promotional products — a larger, stickier “everything a workplace needs” distribution wallet, and the rationale for the Essendant deal.

Business model and pricing

Staples makes money two ways with very different margin profiles. Retail is transactional and thin, exposed to commodity price competition from Walmart, Costco and Amazon. B2B contract distribution is the margin engine: negotiated multi-year agreements priced per-account, with volume commitments, private-label mix and category breadth driving profitability rather than shelf price. There is no published per-seat or take-rate number — this is a private company — but the shape is a classic distributor: modest gross margins on a large revenue base, converted to cash through working-capital discipline and scale purchasing.

The reported economics are respectable for the category: adjusted EBITDA of roughly $690M (FY21), ~$835M (FY22) and ~$900M (FY23) at ~9% margins (Debtwire/ION Analytics). The problem is where the cash goes. Against ~$5B of debt refinanced in June 2024 at coupons up to 12.75%, a large share of that EBITDA is consumed by interest rather than reinvested in the delivery network, technology or price. The model works operationally; the question is whether it works after the capital structure takes its cut.

Traction over time

Two trends dominate. First, the deliberate shift out of stores: even in 2016, before the buyout, more than 60% of revenue already came from delivery and online, and the company aimed for ~80%. Sycamore has accelerated that, closing stores every year while trying to grow the B2B book. Second, the leverage ratchet: the 2019 dividend recap alone pushed debt above $5.3B and let Sycamore recoup roughly 80% of its equity within two years of buying the company — a textbook PE outcome that de-risked the sponsor while leaving the operating company more indebted. Revenue is unreported post-buyout; credit-market estimates cluster around $8-11B for the US entity, with EBITDA the number lenders actually watch.

Market analysis

The core market is shrinking. US office-supply sales across physical and digital channels totaled ~$11.5B in 2024, down ~5% year-over-year, with brick-and-mortar off ~6% and ecommerce rising to ~24% of the total. The structural forces are unambiguous: digitization (less printing, less paper), hybrid work suppressing per-desk consumption, and return-to-office stalling below pre-pandemic levels — a headwind credit analysts explicitly flag. Against that, the broader “workplace supplies” wallet Staples is chasing — facilities, breakroom, jan-san, packaging, tech — is far larger (some tallies put office-products-and-adjacencies near $90B) and growing slowly, which is why both Staples and ODP are repositioning as broad B2B distributors. The strategic logic is sound; the execution risk is that these categories are already owned by bigger, healthier distributors.

Competitive intel

The named set sits in the competitor table; the structural read is that Staples is squeezed from three sides. On top is Amazon Business ($35B annualized gross sales, 2023), whose logistics, selection and price transparency make it the default for the SMB and enterprise buyers Staples wants, and whose private label eats online supply share. Beside it is ODP/Office Depot ($7.0B revenue, 2024), running the identical retail-to-B2B pivot and fighting for the same contracts; the two have circled each other for a decade (blocked merger 2016, rejected bid 2019). As Staples expands into facilities and MRO adjacencies it runs into Grainger (~$17.2B, 2024) and Uline, both far larger and un-levered, plus specialist W.B. Mason, which wins B2B accounts on service intensity — while Walmart, Costco and Best Buy bleed off commodity and tech retail traffic. Staples’ edge is its installed base of contracts, private label and national delivery network — but every rival is bigger, cheaper, or unburdened by a $5B debt load.

History and evolution

• 1985-1986 — Stemberg and Kahn incorporate Staples (1985) and open the first office-supply superstore in Brighton, MA (May 1986).
• 1989 — IPO on NASDAQ (~$37M raised); private label launched; sales reach ~$120M.
• 1990s-2000s — National superstore expansion; duopoly with Office Depot; international and delivery businesses built out.
• February 2015 — Announces ~$6.3B agreement to acquire Office Depot.
• May 2016 — Federal court grants the FTC’s injunction; the merger collapses; Staples pays a $250M breakup fee.
• June-September 2017 — Sycamore Partners agrees to buy Staples for ~$6.9B; deal closes in September; company split into three separately financed units (US retail-and-B2B, Canada, Europe).
• Late 2018 / January 2019 — Sycamore-affiliated deal for Essendant (~$483M), the largest US office-products wholesaler; FTC clears it with firewall conditions; ~$300M dividend to Sycamore.
• April 2019 — ~$1B dividend recapitalization; total debt above $5.3B; Sycamore recoups ~80% of its equity. Separately, Staples makes an unsolicited ~$2.1B bid for Office Depot’s parent, which is rejected.
• 2021-2023 — EBITDA recovers (~$690M FY21 to ~$900M FY23); Canada and Europe operated/sold separately; DEX Imaging sold to Gamut Capital (April 2024).
• May-June 2024 — Comprehensive ~$5B refinancing/debt exchange: 10.75% 2027 notes swapped into 12.75% junior-lien 2030 notes; S&P revises the outlook to stable at B- after earlier pressure.
• August 2025 — Rachel Huckle named CEO of Staples US, ending a years-long permanent-CEO vacancy.
• 2025-2026 — Store closures continue (~929 to ~916 US locations, Oct 2025-Jan 2026); stores add third-party services (optical, TSA PreCheck, Verizon) to defend the box.

What people say

The case for. Credit analysts, not equity bulls, are the relevant audience for a private LBO — and their read has improved. S&P revised Staples’ outlook to stable and affirmed a B- rating in May 2024, judging the company able to refinance on the strength of better performance and cash flow, and calling the DEX Imaging sale modestly credit-positive. The operating story supports it: adjusted EBITDA rose from ~$690M (FY21) to ~$900M (FY23) at ~9% margins, and the B2B franchise generates recurring, contract-based revenue that is genuinely sticky — the majority of the business, insulated from daily retail volatility. The June 2024 refinancing did extend maturities past five years and reduce outstanding debt, buying time. Bulls argue the delivery-and-distribution core is a real asset that would survive even if the stores kept shrinking.

The complaints. The bear case is loud. Credit and trade press (Debtwire/ION Analytics) frame Staples as a return-to-office casualty carrying refinancing risk, and the June 2024 exchange — swapping 10.75% notes for 12.75% junior-lien paper — is the tell: coupons that high signal a market pricing real distress, and interest at those rates consumes cash the franchise needs. Sycamore’s dividend recaps (recouping ~80% of equity by 2019) drew criticism for enriching the sponsor while indebting the operating company. Customers are unhappy: Trustpilot reviews skew negative, dominated by delivery failures — late shipments, broken next-day promises, wrong or missing packages — and BBB complaints cite undelivered orders with no proof of delivery and no resolution. Employees are lukewarm: Glassdoor ~3.2/5 (14,650 reviews), only ~42% recommending the company, with recurring themes of understaffing, thin resources and burnout. In a delivery business, chronic service complaints and demoralized staff are not cosmetic — they are the product breaking.

Outlook: well positioned or at risk?

At-risk — because a genuinely useful B2B distribution franchise is trapped inside a capital structure and a category that both work against it. Staples Business Advantage is a real business: recurring contract revenue, a national delivery network, private-label margin, and a credible strategy to expand from pens-and-paper into the broader workplace-supplies wallet. In a vacuum, that franchise could compound. It does not operate in a vacuum. It sits behind ~$5B of debt refinanced in June 2024 at coupons up to 12.75% — a level that says the market sees material default risk — and every dollar of interest at those rates is a dollar not spent on the delivery service, technology and price the franchise needs to fight Amazon Business and ODP. Sycamore has already extracted most of its equity through dividend recaps, which aligns the sponsor with financial engineering, not long-term reinvestment.

Layer on the category: US office-supply sales are in structural decline (~$11.5B, down ~5% in 2024), return-to-office has stalled, and the adjacencies Staples is expanding into are already dominated by larger, un-levered distributors (Grainger, Uline) and by Amazon’s logistics. The retail fleet is a melting asset managed down store by store. The honest counter-case is that the refinancing bought time, EBITDA is stable at ~$900M, and B- is not default — this is not a collapse thesis. But the question is whether the position compounds or erodes, and the evidence points to erosion: a good operating business losing share and cash flow to healthier competitors while its owners optimize the balance sheet. The franchise may survive; the trajectory is downhill, and the leverage removes the margin for error a declining incumbent most needs.

How a challenger would attack it

Attack the delivery promise the balance sheet can’t fund. Staples’ surviving franchise is contract delivery, and its own record undermines it: Trustpilot and BBB complaints cluster on late shipments, broken next-day promises and undelivered orders with no resolution, while Glassdoor’s understaffing-and-burnout themes explain why. A challenger — W.B. Mason’s model, modernized — would sell service intensity as the product: named account reps, published fill-rate and on-time SLAs with automatic credits, and a delivery network built for the same-day metro coverage Staples is still targeting for 2026. The structural opening is the debt: with ~$5B refinanced at coupons up to 12.75%, a large share of Staples’ ~$900M EBITDA goes to creditors, so it cannot simultaneously match Amazon Business on price, reinvest in logistics, and service its paper — a challenger can price aggressively knowing Staples’ counter-move is capped. Second vector: cherry-pick the contract book at renewal. Enterprise and government supply contracts re-bid on schedule, and every service failure during the term is ammunition. Third: ignore the stores entirely — the ~900-box fleet is Staples’ fixed-cost anchor, not an asset to replicate, and a delivery-only attacker carries none of it.

Same playbook, new buyer

The playbook — contract distribution of workplace consumables with private-label margin — works better aimed at growing wallets than the shrinking one Staples defends. The category it invented is declining ~5% a year; the adjacencies it is limping toward — breakroom, jan-san, facilities, packaging, part of a ~$90B workplace wallet — are the real market, and a distributor built natively for them (rather than diversifying out of paper) sells to the same procurement departments without the legacy mix. The sharper segment shift is the hybrid-work office itself: distributed companies provisioning home offices, coworking operators, and flex-space managers need per-employee kitting and doorstep delivery, a buyer that superstore-era infrastructure was never designed for and that turns Staples’ return-to-office headwind into the customer base. Vertical wedges work too — healthcare clinics, schools and field-service trades each buy workplace consumables through channels Grainger and Uline serve only partially. Staples cannot follow with conviction: Sycamore has already extracted its equity and optimizes for cash, every reinvestment dollar competes with 12.75% interest, and management’s attention is consumed managing the store fleet’s decline. The franchise knows where the growth is; the capital structure won’t let it go there first.

Sources and further reading

• Staples to be acquired by Sycamore Partners for $6.9B — Retail Dive, June 2017. Terms of the take-private LBO.
• Sycamore Plans to Split Staples into Three Separately Financed Entities — Fox Business, June 2017. The US/Canada/B2B carve-up and its financing logic.
• Judge blocks Staples-Office Depot merger in response to FTC suit — DC Office of the Attorney General, May 2016. The blocked 2015 merger and $250M breakup fee.
• Sycamore set to take $1B out of Staples — PitchBook, March 2019. The dividend recap, ~$5.3B debt, and ~80% equity recoup.
• FTC Imposes Conditions on Staples’ Acquisition of Essendant — Federal Trade Commission, January 2019. The vertical wholesale deal and firewall.
• Staples in focus as return-to-office stagnates, market mulls threat of financial maneuvers — ION Analytics / Debtwire, 2024. EBITDA figures, debt maturities, refinancing risk.
• Staples, Inc. Successfully Completes Refinancing — Business Wire, June 2024. The ~$5B refinancing and 12.75% junior-lien notes.
• S&P Global revises Staples outlook to stable — Retail Dive, May 2024. B- rating affirmation and rationale.
• Iconic national office retailer closing stores, no bankruptcy — TheStreet, 2025. Store-count decline and the B2B pivot.
• Staples Reviews — Trustpilot and Glassdoor — 2026. Customer delivery complaints; ~3.2/5 employee sentiment.
• Thomas Stemberg, founder of Staples office-supply chain, dies at 66 — The Washington Post, October 2015. Founding story and the superstore era.