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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

STAPLES, INC.
(Exact name of registrant as specified in its charter)

Five Hundred Staples Drive, Framingham, Massachusetts 01702
(Address of principal executive offices and zip code)

508-253-5000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:
Staples Retail and Delivery Common Stock, par value $0.0006 per share
(Title of each class)

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes /x/  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  / /

    The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the last sale price of Staples Retail and Delivery Common Stock on January 29, 2000, as reported by Nasdaq, was approximately $9.6 billion. In determining the market value of non-affiliate voting stock, shares of Staples Retail and Delivery Common Stock beneficially owned by each executive officer and director have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

    The registrant had 457,942,409 shares of Staples Retail and Delivery Common Stock and 27,348,094 shares of Staples.com Common Stock, both par value $.0006, outstanding as of March 7, 2000.

Documents Incorporated By Reference

    Listed below is the document incorporated by reference and the part of the Form 10-K into which the document is incorporated:

    Portions of the Proxy Statement for the 2000 Annual Part III

    Meeting of Stockholders

    This Annual Report on Form 10-K contains a number of forward-looking statements. Any statements contained herein (including without limitation statements to the effect that Staples or its management "believes", "expects", "anticipates", "plans" and similar expressions) that are not statements of historical fact should be considered forward-looking statements. There are a number of important factors that could cause Staples' actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Future Operating Results."

PART I

Item 1. Business

Staples

    Staples, Inc. and subsidiaries ("Staples" or "the Company") pioneered the office products superstore concept and is a leading office products distributor, with a total of 1,129 retail stores located in the United States, Canada, the United Kingdom, Germany, the Netherlands and Portugal as of January 29, 2000. In addition, Staples has a catalog business, an electronic commerce business and contract stationer operations.

    During 1999, our stockholders approved a Tracking Stock Proposal which allowed us to issue a new series of common stock, Staples.com Stock, intended to reflect the performance of our electronic commerce business, which operates under the name Staples.com. Staples' existing common stock was reclassified as Staples Retail and Delivery common stock ("Staples RD Stock"), intended to reflect the performance of our non electronic commerce businesses and a retained interest in Staples.com. From an accounting standpoint, we have separated Staples.com from Staples Retail and Delivery ("Staples RD"). We have allocated all of our consolidated assets, liabilities, revenue, expenses and cash flow between Staples.com and Staples RD. These two businesses are each sometimes referred to in this 10-K as a "Business" and collectively as "Businesses."

    Staples' executive offices are located at 500 Staples Drive, Framingham, Massachusetts 01702 (telephone: (508) 253-5000). Staples was organized in November 1985 and is incorporated in the State of Delaware.

Staples Retail and Delivery

    Staples RD includes Staples' retail stores, catalog business, contract stationer operations and a retained interest in Staples.com. This retained interest in Staples.com was 88% as of January 29, 2000, but will decline as we issue Staples.com Stock under either our stock plans or in one or more public or private financings.

Staples.com

    Staples.com is creating a leading business-to-business electronic marketplace offering a comprehensive solution for the office needs of business customers. We currently provide an electronic marketplace where small, mid-sized and large businesses can procure office products and business services and obtain business information and expert content. Our principal web sites, Staples.com, Quillcorp.com and StaplesLink.com, leverage the brand recognition and fulfillment infrastructure of Staples. By aggregating business customers, we are creating a sales channel that will provide buyers and sellers with opportunities to realize operating efficiencies by streamlining complex purchasing and distribution decisions and to increase revenue by reaching a broader customer base.

Business Strategy—Staples Retail and Delivery

    We view the office products market as a large, diversified market for office supplies and equipment, business machines and computers, and various business services. Although there are no clear demarcations among segments, we target four principal end-user groups:

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consumers and home offices;



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small businesses and organizations with fewer than 100 office workers;



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medium-size businesses and organizations, which have between 100 and 499 office workers;



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large businesses with more than 500 office workers.

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    Our ability to address all four major end-user groups increases and diversifies our available market opportunities, increases awareness of the Staples name among customers in all four end-user groups, who often shop across distribution channels, and allows us to enjoy a number of important economies of scale such as increased buying power, enhanced efficiencies in distribution and advertising, and improved capacity to leverage general and administrative functions.

    We effectively reach different sectors of the office products market through different channels of distribution designed to be convenient to each targeted market sector. Our in-store operations seek to address the retail needs of customers, while our delivery operations focus on customers who desire delivery of their office products and other specialized services.

    We maintain our historical focus on being a low cost operator and believe that we have significant opportunities to reduce costs as a percentage of sales. We believe that our future expansion will enable us to leverage certain fixed costs in store operations, marketing, distribution and administration. We also seek to enhance productivity through improvements in operating practices.

    We continue to increase staffing levels in stores and delivery operations and to make other investments to provide better customer service. In addition, we continue to drive a corporate-wide C.A.R.E. (Customers, Associates, Real Communications and Execution) program designed to empower associates to exceed customer expectations for service by providing "great service, every day, every way" and have implemented programs that tie a portion of incentive compensation to achievement of customer satisfaction goals.

North American Superstores

    Our North American retail operations, consisting of 991 stores as of January 29, 2000, are our core business, generating a substantial majority of our sales and profits. Our retail operations focus on serving the needs of customers primarily in the consumer, home office and small business segments of the office products market. We are devoting significant resources and efforts to profitably increasing our retail sales per store in both North America and Europe. These initiatives cover a wide-range of store operations, including product and service offerings, inventory planning, staffing, customer satisfaction and improvements in store design.

    We are continuing our store growth program. In fiscal year 1999, we opened 152 stores in North America and 23 stores in Europe. In fiscal 2000, we intend to open approximately 150 stores in North America and 20 stores in Europe. Our store growth strategy follows a three-pronged approach of continuing the growth of our store network in existing markets, entering smaller markets within both existing and new geographic areas, and entering major new markets. To support this commitment, we are also taking steps to strengthen our infrastructure, including our distribution capabilities.

    Superstores.  Our North American superstores are located in 44 states, the District of Columbia and 10 Canadian provinces in both major metropolitan markets and smaller outlying markets. Our current superstore prototype is approximately 24,000 square feet. Our strategy for our North American superstores focuses on four key objectives:

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provide superior customer value through a combination of broad product selection, everyday low prices, outstanding customer service and convenient locations;



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increase our presence in targeted markets by adding new superstores and achieving economies of scale in most of the major markets where we compete;



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reduce operating costs to the lowest level consistent with providing quality merchandise and service; and



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offer a comfortable, easy to shop store environment with skilled sales associates available to assist the customer.

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    Express Stores.  In select urban markets, we operate a smaller store format, "Staples Express", which offers a more focused assortment of products. These smaller stores give us the opportunity to meet the office supply needs of customers in a store format that is efficient and economical in an urban environment. Staples Express stores range from approximately 6,000 to 10,000 square feet. During fiscal year 1999, Staples introduced two airport stores to meet the needs of the business traveler each of which are approximately 1,500 square feet.

North American Delivery Operations

    Our delivery operations of Staples RD are comprised of two principal operations:

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Our catalog businesses, operating under the names "Staples Direct" and "Quill Corporation;" and



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Our contract stationer businesses, operating under the names "Staples National Advantage" and "Staples Business Advantage."

    We are implementing a number of actions to grow our delivery business. These actions include: broadening product offerings; offering specialized, more focused marketing initiatives; and expanding distribution capacity.

    Staples Direct.  Operating since 1990, Staples Direct, our direct mail catalog business, reaches all targeted segments of the office products market seeking the convenience of telephone ordering and free next day delivery for orders over $50. Delivery orders are shipped from our delivery distribution centers and are distributed through dedicated delivery hubs. In some markets, we also deliver products directly from our retail stores. We market Staples Direct through both direct mail catalogs and a sales force primarily focused on generating new accounts.

    Quill Corporation.  Acquired in May 1998, Quill is a direct mail catalog business with a targeted approach to servicing the business product needs of more than 750,000 medium sized businesses in the United States. Quill markets primarily through the distribution of catalogs designed to meet the needs of specific customer segments. Quill offers outstanding customer service, a superior private label product, and special services to attract and retain its customers.

    Staples National Advantage and Staples Business Advantage.  Our contract stationer operations focus primarily on serving the needs of medium- to large-size businesses that sometimes may seek more services than are provided by a traditional retail or mail order business, such as customized pricing, payment terms, usage reporting and the stocking of certain proprietary items. Our contract stationer business is divided into two segments. Staples National Advantage is a nationwide contract stationer business focused on selling to large multi-regional businesses. Staples Business Advantage focuses on selling to medium- and large-size regional companies and has the flexibility to handle smaller accounts. We initially established this business through acquisitions of regional contract stationers, and more recently have entered certain metropolitan markets through the expanded sales and distribution capabilities of Staples Business Advantage.

International

    We started doing business in Europe in 1992. As of January 29, 2000, Staples, through its wholly owned subsidiaries, operates 63 stores in the United Kingdom, 47 stores in Germany, 21 stores in the Netherlands and 7 stores in Portugal, with delivery operations in the United Kingdom and Germany. During 1999, we completed the acquisition of three European office supply companies which included 42 office supply superstores, with 15 stores in Germany, 21 stores in the Netherlands and 6 stores in Portugal. We also expanded Quill's operations into the United Kingdom during fiscal year 1999.

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Business Strategy—Staples.com

    Our three principal web sites, Staples.com, Quillcorp.com and StaplesLink.com, leverage the brand recognition and fulfillment infrastructure of Staples. Each of our web sites is targeted to the needs of a particular segment of our customer base:

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Staples.com is our core electronic marketplace for small businesses, home offices and consumers. The web site provides complete, on-site transaction processing for the purchase of over 130,000 office products and services. Staples.comalso hosts our Business Solutions Center, which will be the site of our business-to-business trading hub, messaging boards and other interactive features.



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Quilcorp.com leverages the strength of the Quill brand name in the catalog-order office products market to sell to small and mid-sized businesses. Quill, which was acquired by Staples in 1998, has been a direct retailer of office products through catalogs for over 40 years.  Quillcorp.com  offers over 20,000 office products from Quill's direct mail catalogs, including Quill's private label products.



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StaplesLink.com leverages the strength of the Staples brand name in the contract stationers market to provide online procurement of office products for large businesses. StaplesLink.com offers the highest level of procurement functionality of our web sites, including customized pricing, payment terms, usage reporting and full service account management designed to appeal to businesses which require high levels of procurement control.

    Our objective is to create the leading business-to-business electronic marketplace offering a comprehensive solution for the office needs of our business customers. We seek to provide a single online destination where businesses can procure a broad array of office products and business services, access and exchange business information and expert content and conduct electronic commerce transactions with each other. Key elements of Staples.com's strategy include:

    Capitalize on Staples Relationship.  Staples.com's relationship with Staples provides it with significant competitive advantages. We plan to continue to leverage these advantages, such as Staples' top brand name among small businesses, large product selection, purchasing power and national distribution capabilities, to generate sales and traffic on our web sites.

    Grow Customer Base.  We plan to aggressively acquire new business customers and drive repeat purchases by leveraging our strong brand franchise, providing easy access to a wide selection of products, services and information and utilizing Staples' and Quill's extensive direct marketing experience, sophisticated marketing techniques and high-quality customer service. Additionally, we intend to generate incremental sales from Staples' existing customers by offering them an additional distribution channel for their purchases and by offering them a variety of business services. We conduct various cross-marketing, co-promotion and customer acquisition programs with Staples to leverage Staples' database of approximately 8,000,000 business customers. We utilize information about our customers to help us identify market needs, enhance our web sites and effectively tailor our market strategy. We also expect to generate sales from our electronic kiosks in Staples' retail stores where customers can purchase products online that are not available in the store.

    Leverage High-Quality Customer Traffic.  Staples.com's product and service offerings drive high quality and high frequency traffic to our web sites. We plan to further grow our sales by offering a complement of business services, both through our partners and our RFQ marketplace, which are intended to cause buyers and sellers to visit our web sites to access this network of small and mid-sized businesses and vendors. As the number of visitors to our electronic marketplace grows, we believe that a greater diversity of buyers and service providers will be attracted, which, in turn, should create a viral network effect increasing the amount of customer traffic to our web sites.

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    Apply Sophisticated Direct Marketing Techniques.  We plan to take advantage of Staples' and Quill's significant direct marketing expertise, as well as the customer profile information that we gather through our web sites, to tailor our products and service offerings to the individual needs of our customers.

    Build Online Brand Awareness.  We will continue to invest in building our online brands and in communicating the benefits and convenience of shopping at our web sites. We believe that we are well positioned to establish Staples.com, Quillcorp.com and StaplesLink.com as premier online brands for office products and services, related business information and community. We benefit from our relationship with Staples through multiple cross-marketing initiatives. For example, Staples' print advertising and circulars typically contain the Staples.com web site address. We plan to continue to use local and national media, including online, television, radio, print and outdoor advertising, to further enhance our online brand. In addition, we will continue to enter into online marketing arrangements. For example, we are featured as the premier office supply and services merchant on Yahoo! Small Business.

    Continually Enhance the Customer Experience.  We seek to continually enhance our web sites based on our targeted customers' preferences and needs. Our web sites allow us to gather significant data on customer browsing and shopping preferences. We use this information to dynamically change our product offerings to meet the changing preferences and needs of our targeted customers. We also use this information, as well as online questionnaires, to refine the layout and performance of our web sites. In early 2000, we plan to launch newly designed versions of our web sites with enhanced functionality. We expect that continued enhancements of our web sites will make shopping with us more efficient and generate increased customer satisfaction.

    Expand Strategic Alliances.  We will continue to use strategic alliances and equity investments, such as those we have with BizBuyer.com, DSL.net, HotOffice Technologies, Register.com and Point.com, to expand our business service offerings, gain entry into new markets and drive traffic to our web sites. Staples.com's relationship with Staples enables it to establish strategic alliances with partners seeking to establish cross-marketing relationships with Staples and Staples.com.

    Expand Internationally.  We plan to expand our offerings in Canada through Staples.com of Canada, BusinessDepot.com and Bureau en Gros, the online outlets of Staples' Canadian retail stores. These sites are available in French and English. We believe that the experience we gain in Canada will enable us to expand efficiently into Europe and other international markets in the future.

Products, Services and Purchasing

Products and Services

    We tailor our product mix to meet the needs of our customers by regularly evaluating sales and profit performance for each of our SKUs. In order to minimize unit costs and selling prices, we sell most products in multi-unit packages. The lot sizes are designed to be large enough to be cost effective without being burdensome to our small business customers.

    We guarantee low prices to our customers and will not only match competitive prices but will also pay 55% of the price difference (up to $55) as a credit towards future purchases. We continuously compare our pricing against other discount office supply stores, local stationers, warehouse clubs, mass merchants, computer superstores, consumer electronics retailers, electronic commerce distributors and mail order stationers to ensure that our strategy of maintaining everyday low prices is achieved.

    We offer our customers an array of services. Customers may place orders by telephone for delivery or for customer pickup or via the Internet. Customers may pay with MasterCard, Visa, American Express, Discover, or the Staples private label credit card, in addition to check or cash. We also offer customers an option to lease business machines and computers through a third party lessor with varying terms. In our retail stores we offer high-speed and self-service copying, overnight mailing, faxing and other print services

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as well as payroll services, build to order computers, telecommunications through Staples Communications and other such services for our customers. Our return policy entitles customers to return all goods, except computers, business machines, printers and software, in original packaging within 30 days after the date of sale for a full refund; computers, business machines and printers must be returned in original packaging within 14 days to obtain a full refund. Software packages must be unopened to obtain a full refund within 30 days; open packages will be exchanged only for the same title.

    Our delivery operations carry many of the same products that are sold in retail stores. The contract stationer catalog typically offers products with unique pricing, billing and other services available to each customer.

    Staples.com offers a wide range of competitively priced products selected to meet the needs of the customers. Staples.com's merchandisers work closely with the Staples and Quill merchandise departments to select quality brands and products to feature on the web sites. Staples.com's products are organized into categories similar to those of Staples RD but Staples.com includes a more expansive array of products including approximately 130,000 products.

    Staples.com is creating a leading business-to-business electronic marketplace offering a comprehensive solution for the business service needs of small, mid-sized and large businesses. Staples.com currently offers multiple business services in conjunction with strategic partners who are selected for their quality and reliability. Staples.com's business service offerings are designed to reduce the time that small businesses expend researching, finding and engaging quality service providers. Staples.com seeks to provide a full suite of services which assists customers in every aspect of establishing and managing their office. Staples.com currently offers Internet services which include web site hosting and electronic commerce, web site domain registration and Internet access; office services which include online business printing and intranet services; financial services which include payroll processing and credit; and communication services which include business communications systems and software, voice, data and network solutions and cellular products and services. In addition, Staples.com plans to expand its electronic marketplace, through its relationship with BizBuyer.com to enable customers to request quotes from a network of over 20,000 service providers offering over 40 services.

    The following table shows sales by each major product line for Staples as a percentage of total sales for the periods indicated:

Purchasing and Vendor Selection

    We select our vendors based upon quality, price, delivery reliability and, where appropriate, customer brand recognition for all Staples sales channels. We believe we are able to purchase merchandise at attractive costs in large part because of our centralized distribution facilities. We can purchase truckload quantities of attractively priced, high-quality products from multiple vendors and thereby achieve substantial cost savings in each product category. In addition, we are able to obtain favorable pricing due to the volumes in which we purchase our products.

    We offer several hundred private label items, including copy paper, staplers, envelopes, mailing and shipping supplies, a variety of fastening supplies, chairs, computer accessories, calculators and diskettes. Through our global product sourcing program, we are able to procure private label products at a lower cost than brand name products.

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    Currently, we purchase products from several hundred active vendors worldwide. We believe that competitive sources of supply are available for substantially all products we carry. Our buying and merchandising staff centrally perform all product purchasing and merchandise planning for all customer channels with the assistance of integrated computer systems.

Supply Chain Initiatives

    We operate centrally located distribution centers across the United States to service the majority of our replenishment and delivery requirements for our U.S. retail, catalog and electronic commerce operations. Most products are shipped from our suppliers to the distribution centers for reshipment to our stores and delivery hubs, or are directly shipped to customers. The distribution centers employ state of the art warehouse management systems and radio frequency technology, just-in-time replenishment procedures and material handling equipment that help to minimize overall inventory levels while maintaining optimal in-stock positions at the store level. Product processing and ticketing are performed at the distribution center to improve labor efficiency and reduce cost. Products generally are delivered to our stores within 48 hours after our automated replenishment system generates an order for the product based on daily point of sale information. Staples.com and StaplesLink.com are directly tied to Staples' fulfillment centers enabling customers to promptly determine whether ordered products are available.

    We believe our distribution centers provide us with significant labor, merchandise and inventory shrinkage savings by centralizing receiving and handling functions and by enabling us to purchase in full truckloads from suppliers. We believe that the reduction in the number of purchase orders and invoices processed results in significant administrative cost savings. Our centralized purchasing and distribution systems also permit store employees to spend more time on customer service and store presentation.

    Since the distribution centers maintain backup inventory, in-store inventory requirements are reduced and we operate smaller gross square footage stores than would otherwise be required. Smaller store size reduces our rental costs in the expensive markets in which we currently operate and allows us improved flexibility in locating stores more closely to our target customers.

    We continue to enhance our distribution network to support our operations. We recently opened two new distribution centers: Terre Haute, Indiana (550,000 sq. ft.) in January 2000 and Rialto, California (495,000 sq. ft.) in January 1999 . During fiscal year 1997, we also opened Killingly, Connecticut (310,000 sq. ft.) in January 1998 and Hagerstown, Maryland (840,000 sq. ft.) in March 1997 . These four new facilities are expected to replace a network of approximately 11 distribution centers formerly used to support U.S. retail operations.

    In 1999, Staples opened distribution centers in three new markets, Stockton, California, Charlotte, North Carolina, and Vancouver, Canada, to further support the catalog and contract division. In late 1998, Staples retrofitted the former retail Putnam/Plainfield, Connecticut distribution center (380,000 sq. ft.) to support all three channels of its catalog and contract division.

    Staples.com maintains no inventory but rather sells products maintained as inventory in Staples' delivery operations' nationwide network. Staples.com and StaplesLink.com are directly tied to Staples' fulfillment centers enabling customers to promptly determine whether ordered products are available. Staples.com typically can fill approximately 80% of all U.S. orders from Staples' in-stock inventory. Staples.com products are delivered through third-party couriers and Staples' delivery fleet.

Marketing Strategy—Staples Retail and Delivery

    We pursue a variety of marketing strategies to attract and retain target customers. These strategies include broad-based media advertising such as radio, television, newspaper circulars, Internet and print advertising as well as catalogs and a sophisticated direct marketing system. In addition, we market to larger companies through a combination of direct mail catalogs, customized catalogs and a field sales force. We

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change our level of marketing spending as well as the mix of media employed depending upon market, competitive and cost factors. This flexible approach allows us to optimize the effectiveness and efficiency of our marketing expenditures.

    In 1999, we continued to invest in our nationally recognized television campaign and began to supplement our spot television schedule with network ads. This television advertising is designed to raise awareness of Staples and penetration levels for both the household and business customer segments across the country. In addition, we expanded our print advertising campaign in order to support key product categories. We also have the naming rights agreement with L.A. Arena Company, LLC, which designed the Staples Center, a new state of the art sports and entertainment complex in downtown Los Angeles, which opened in 1999. This agreement provides us with marketing, promotional and signage rights, community-based programs and various amenities in the Staples Center for 20 years.

Marketing Strategy—Staples.com

    Staples.com has designed its marketing strategy to build awareness of the Staples.com brands, increase traffic to its web sites, encourage repeat business and expand its customer base. We use both online and offline marketing to carry out our marketing strategy. Our online marketing includes e-mail promotions and special programs, such as special pricing on key items. We have established online marketing relationships with several leading web sites that feature integrated links to our web sites. For example, we are featured as the premier office supply and services merchant on Yahoo! Small Business. Our offline marketing includes traditional advertising on television and in other media, which is often combined with advertising for Staples' superstores. Advertising for Staples.com is often included in direct marketing for Staples' retail stores and catalogs. As part of Staples' multi-channel promotions, Staples includes the Staples.com web site address in its print advertisements and catalogs and promotes Staples.com as one of its "three ways to save", in addition to its well established retail stores and catalog operations. In marketing to small and mid-sized businesses, we utilize sales representatives in Staples' catalog operations, which consisted of 250 employees as of February 16, 2000. In marketing to StaplesLink.com's large business customers, we utilize Staples contract stationers' sales force, which consisted of 505 employees as of February 16, 2000. We also take advantage of the telemarketing resources of both Staples and Quill to market our web sites. We seek to further benefit from our relationship with Staples by placing kiosks linked to our web sites in Staples' retail stores.

Operations—Staples Retail and Delivery

    We strive to be the lowest cost operator of office products servicing our targeted customers. We seek to create stores that appeal to our target customers for their broad selection, everyday low prices, convenience, shopability and helpful service. Our stores typically are open seven days per week.

    Our retail stores display inventory according to a plan-o-gram that designates graphically the place each item in each section of the store is displayed and specifies the quantity to be stocked. Related items are typically grouped together for customer convenience. Store layouts are as uniform as the various facilities allow, so that products destined for stores can be picked at the distribution center to match store aisles.

    Our computer systems replenish inventory levels for each SKU by store based on our rate of sale and variability in rate of sale. Sales and inventory levels are tracked by SKU at each store through our point-of-sale system and are transmitted nightly to our host computer. Reorders from the distribution center are processed so that inventory arrives at our stores as needed.

    Stores are brightly lit and products are attractively displayed. Employees are available to consult on purchases, particularly in our furniture, business machines and computer sections, where customers often need assistance in decision-making. This positions us to offer our customers more technology solutions such as Build to Order computers as well as computer upgrades and services through the Staples Tech

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Center. Also included are enhanced product assortments in furniture, paper and technical office supplies. In the services category, the current store model promotes the Staples Copy Center and Business Solution Center with enhanced services and, where market conditions warrant, expanded copy centers. Our current superstore prototype is approximately 24,000 square feet, which allows for enhanced business services, product depth and capital goods sales. Where possible, we have expanded existing stores to fit the current format. We committed to a plan during 1998 to close and relocate stores that are not deemed appropriate for expansion or upgrade to the current store model.

    We have continued to make an investment in computer-based, multi-media training programs to upgrade staff selling skills and improve customer service at our retail stores and delivery operations. Much of the training targets sales of capital goods such as fax machines, copiers, furniture and computers. Additionally, we continue to increase our efforts to improve our in-stock position as well as expand the product depth in certain key categories in order to best serve our customers.

Operations—Staples.com

    Technology:  Staples.com has implemented a broad array of scalable electronic commerce, site management, search, and customer interaction services and systems that we use to process customers' orders and interact with customers. These services and systems use a combination of our own technologies, Staples' technologies and commercially available, licensed technologies. The systems that we use to accept and process customers' orders are integrated with the order management, payment processing, distribution, accounting and financial systems of Staples. We focus our internal development efforts on creating and enhancing specialized software that is unique to our online business. We use a set of applications for:

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accepting and validating customer orders for products;



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transmitting orders to Staples for processing and fulfillment;



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interacting with customers for customer service and other purposes; and



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connecting to third parties for sale and delivery of certain products and services to customers.

    Our systems have been designed based on industry standard architectures and have been designed to reduce downtime in the event of outages or catastrophic occurrences. Our web systems hardware is hosted at third-party facilities in Beltsville, Maryland, Hopkinton, Massachusetts and Philadelphia, Pennsylvania. The associated Staples systems hardware resides at Staples facilities in Framingham, Massachusetts and Quill facilities in Lincolnshire, Illinois. We have implemented load balancing systems and our own redundant servers to provide for fault tolerance of our web systems.

    Customer Service:  Staples.com has a dedicated customer service staff and also utilizes Staples' customer service representatives. They handle questions about orders and assist customers in finding desired products and services. Staples.com's customer service representatives share the call center infrastructure of Staples. Staples.com's sophisticated e-mail management system and Staples' telephone Automatic Call Distributor allow Staples.com to prioritize incoming contacts, route them to the appropriate customer service representatives and respond in a timely fashion. Staples.com's customer service representatives, customer phone calls and customer e-mails are valuable sources of feedback regarding customer satisfaction. In addition, by providing Staples.com's customer service function in-house, Staples.com maintains a direct relationship with its customers. Staples.com also uses an online market research company to obtain monthly customer feedback. This information is used to determine opportunities for improvement and to evaluate areas of success. Our web sites also provide several service options, including FAQs, e-mail, live help through toll free 800 numbers, as well as a list of nearby store locations.

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Associates and Training

    Staples places great importance on recruiting, training and providing the proper incentives for quality store level personnel. Staples recruits actively on college campuses and also hires talented individuals with experience in successful retail operations. Additionally, current associates are rewarded for recruiting new associates.

    Staples considers customer relations and its associates' knowledge of office products and office-related capital goods to be significant to its marketing approach and its ability to maintain customer satisfaction. New management trainees advance through the store management structure by taking on assignments in different areas as they are promoted. Store and call center employees prepare for new assignments by studying training modules, including written manuals, video instruction and self-testing, that are prepared by Staples and others. These associates are trained in a number of areas, including, where appropriate, sales techniques, management techniques and product knowledge.

    Staples.com uses Staples' personnel for certain functions, including financial and accounting services, information system services, certain selling and marketing activities, certain merchandising and replenishment services, transportation and warehouse management services, certain customer service activities, executive management, human resources, legal and corporate planning activities. As a result, Staples.com pays an allocated portion of Staples' expenses.

    Staples offers eligible associates the opportunity to acquire equity in the Company through an employee stock purchase plan, and also grants stock options and restricted stock to certain of its associates as an incentive to attract and retain such associates.

    As of January 29, 2000, Staples employed 27,573 full-time and 22,420 part-time associates.

Expansion Strategy—Staples Retail and Delivery

    Our expansion strategy involves the establishment of a strong market position by increasing our presence in targeted metropolitan markets by operating a full network of stores, entering small markets and focusing growth in those markets where products can be cost effectively replenished through our distribution centers. Our delivery channel then infiltrates the new markets entered by the stores and increases their catalog opportunities. We believe that the network of stores, catalog and e-business in a metropolitan market enhances profitability by leveraging marketing costs, distribution expense and supervision costs.

    We currently plan to open approximately 150 stores in North America and approximately 20 stores in Europe in fiscal 2000. Our growth strategy calls for continuing to increase our presence along both the East and West coasts of the United States as well as portions of the Southeast and Midwest regions. Additionally, we plan to expand into one or more major new markets per year as well as numerous smaller markets.

    In determining where to open new stores and actively market our catalog, we evaluate the concentration of small- and medium-sized businesses and organizations, the number of home offices, household income levels, the availability of quality real estate locations, competitive factors and other factors. While most of our stores have been located in conventional strip shopping centers, we have also successfully converted non-retail properties to Staples stores. Although we often lease second-use properties, we have also entered into ground leases where we plan to build a store or arrange to have landlords construct free-standing buildings to our specifications. In addition, we have on numerous occasions acquired lease rights from prior tenants. We believe that this flexibility in selecting sites will prove helpful as we seek to locate additional stores in the challenging real estate markets in which we operate.

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Expansion Strategy—Staples.com

    We plan to expand our Internet operation, Staples.com, during fiscal 2000 by dedicating additional investments in personnel, technology and marketing. We recognize the long-term potential of electronic commerce and plan to aggressively address this market. Staples.com plans to expand its electronic marketplace through its relationship with BizBuyer.com to enable its customers to request quotes from a network of over 20,000 service providers offering over 40 services. By the end of fiscal year 2000, Staples.com expects to offer approximately 100 business services, including human resources, sales and marketing, and insurance services.

Competition—Staples Retail and Delivery

    We compete with a variety of retailers, dealers and distributors in the highly competitive office products market. We believe our customers choose among suppliers on the basis of price, breadth of selection, service and convenience.

    Our target customers have historically been serviced by traditional office products dealers. We believe we have competed favorably against these dealers in the past because we generally offer lower prices. In addition, we believe that our broad product line, depth of in-stock inventory, extended store hours, customer service and shopping environment offer us competitive advantages. Recently, however, some traditional office product dealers have lowered prices and increased their service levels to become more competitive with discount retailers.

    We also compete in most of our geographic markets with other high-volume office supply chains that are similar in concept to Staples in terms of store format, pricing strategy, and product selection, including Office Depot, OfficeMax, and Office World as well as mass merchants, such as Wal-Mart, warehouse clubs, computer and electronics superstores, and other discount retailers. In addition, our retail stores, as well as our delivery operations business, compete with numerous mail order firms, contract stationer businesses, electronic commerce distributors and direct manufacturers. Such competitors have increased their presence in our markets in recent years. Some of our current and potential competitors in the office products industry are larger than us and have substantially greater financial resources. No assurance can be given that such increased competition will not have an adverse effect on our business.

Competition—Staples.com

    The online commerce market and Internet content sites are rapidly evolving and, like the office products and services market, are intensely competitive. Primary competitive factors in our markets include brand recognition, selection, convenience, price, speed and accessibility, depth, breadth and presentation of site content, customer service, and reliability and speed of order shipment.

    We currently compete with a variety of other companies offering office products and services including traditional store-based retailers that sell office products, online office product retailers, traditional providers of services for small business, such as telephone, credit card and insurance companies, and online service providers, such as small business portals, that target the small business market or sell to small business customers.

    We believe that we currently compete favorably with respect to each of the above factors. However, as the market is still rapidly evolving, we may not be able to compete successfully against current and new competitors in the future. Some of Staples.com's current and potential competitors are larger than it and have substantially greater financial resources. No assurance can be given that such increased competition will not have an adverse effect on Staples.com's business.

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Trademarks

    The Company has registered the marks "Staples" and "Staples-The Office Superstore" on the Principal Register of the United States Patent and Trademark Office, the trademark "Staples" in Canada, the United Kingdom and Germany, and the trademark "Quill" in the United States, Canada, Israel, Japan, Mexico and the United Kingdom.

Item 2. Properties

    As of January 29, 2000, Staples operated 1,129 superstores in 44 states, the District of Columbia, 10 provinces in Canada, 10 regions in the United Kingdom, 5 states in Germany, 6 regions in the Netherlands and in Lisbon, Portugal. Staples also operates 38 distribution centers. The following table sets forth the locations of Staples' facilities as of January 29, 2000.

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    Most of the existing stores are leased by Staples with initial lease terms expiring between 2000 and 2023. In most instances, the Company has renewal options at increased rents. Leases for 167 of the existing stores provide for contingent rent based upon sales.

Item 3. Legal Proceedings

    Staples is not party to any material legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

    The Company held a Special Meeting of Stockholders on November 9, 1999, at which the following actions were taken:

1.

The stockholders approved an amendment to the Company's Restated Certificate of Incorporation (i) to authorize a new series of common stock called Staples.com Stock, (ii) to increase the number of authorized shares of common stock from 1,500,000,000 to 2,100,000,000, initially comprised of 1,500,000,000 shares of Staples Stock and 600,000,000 shares of Staples.com Stock, and (iii) to reclassify each outstanding share of existing common stock into a share of Staples RD Stock by a vote of 331,556,155 shares of Common Stock for, 4,314,870 shares of Common Stock against and 1,798,744 shares of Common Stock not voting.

2.

The stockholders approved an amendment to the Company's 1992 Equity Incentive Plan by a vote of 238,291,812 shares of Common Stock for, 96,812,164 shares of Common Stock against and 2,565,793 shares of Common Stock not voting.

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3.

The stockholders approved an amendment to the Company's Amended and Restated 1990 Director Stock Option Plan by a vote of 256,940,397 shares of Common Stock for, 86,610,486 shares of Common Stock against and 2,642,928 shares of Common Stock not voting.

4.

The stockholders approved an amendment to the Company's 1998 Employee Stock Purchase Plan by a vote of 339,553,206 shares of Common Stock for, 4,763,719 shares of Common Stock against and 1,876,886 shares of Common Stock not voting.

PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters

    Staples' Retail and Delivery Common Stock is traded on the Nasdaq National Market under the symbol "SPLS."

    At March 1, 2000, the number of holders of record of Staples Retail and Delivery Common Stock was 9,458 and the holders of record of Staples.com Stock was 379.

    The following table sets forth for the periods indicated the high and low sale prices per share of Staples RD Stock on the Nasdaq National Market, as reported by Nasdaq, retroactively adjusted for the three-for-two stock split in January 1999.

    Staples has never paid a cash dividend on its Staples RD Stock. Staples presently intends to retain earnings for use in the operation and expansion of its business and, therefore, does not anticipate paying any cash dividends in the foreseeable future. In addition, Staples' revolving credit agreement restricts the payment of dividends.

    Between November 17, 1999 and February 7, 2000, we sold 12,892,308 shares of unregistered Staples.com Stock to investors and members of the Board for an aggregate purchase price of $20,787,000 in reliance upon the exemption from registration under Section 4(2) of the Securities Act.

Item 6. Selected Financial Data

    The information required by this Item is attached as Appendix A.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

    The information required by this Item is attached as part of Appendix B.

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

    The information required by this Item is attached as part of Appendix B.

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Item 8. Financial Statements and Supplementary Data

    The information required by this Item is attached as Appendix C.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

    Not applicable.

PART III

    Certain information required by Part III is omitted from this Annual Report on Form 10-K, and incorporated herein by reference to the definitive proxy statement with respect to the 2000 Annual Meeting of Stockholders (the "Proxy Statement") which Staples will file with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Report.

Item 10. Directors and Executive Officers of the Registrant

    The information required by this Item will appear under the headings "Election of Directors" and "Directors and Executive Officers of Staples" in the Company's Proxy Statement, which sections are incorporated herein by reference.

Item 11. Executive Compensation

Summary Compensation

    The following table sets forth certain information concerning the compensation for each of the last three fiscal years of Staples' Chief Executive Officer and the four other most highly compensated executive officers during the fiscal year ended January 29, 2000 (the "Senior Executives").

SUMMARY COMPENSATION TABLE

(1)

In accordance with the rules of the Securities and Exchange Commission, other compensation in the form of perquisites and other personal benefits has been omitted because such perquisites and other personal benefits constituted less than the lesser of $50,000 or 10% of the total annual salary and bonus for the Senior Executive for each year shown.

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(2)

Represents amounts paid under Staples' Executive Officer Incentive plan or executive bonus plan for the relevant fiscal year.

(3)

Amounts reflect the three-for-two stock splits effected on January 30, 1998 and January 28, 1999, as applicable.

(4)

Except as noted below, represents an actuarial equivalent benefit to the Senior Executive from payment of annual premiums by the Company under a split dollar insurance program. Because of differences in Mr. Stemberg's insurance policy, Mr. Stemberg's benefit is calculated using a method that, at this time, results in a lower benefit.

(5)

On October 1, 1999, Mr. Stemberg was awarded 100,000 shares of PARS with a per share value of $20.75. As of January 29, 2000, these restricted shares owned by Mr. Stemberg had a total value of $2,150,000. See "Performance Accelerated Restricted Stock Awards."

(6)

On October 1, 1998, Mr. Stemberg was awarded 150,000 shares of PARS with a per share value of $17.375. As of January 29, 2000, these restricted shares owned by Mr. Stemberg had a total value of $3,225,000. See "Performance Accelerated Restricted Stock Awards."

(7)

On October 1, 1997, Mr. Stemberg was awarded 123,750 shares of PARS with a per share value of $12.4722. As of May 1, 1999, these shares were no longer restricted and had a total value of $3,712,500. See "Performance Accelerated Restricted Stock Awards."

(8)

On October 1, 1999, Mr. Sargent was awarded 75,000 shares of PARS with a per share value of $20.75. As of January 29, 2000, these restricted shares owned by Mr. Sargent had a total value of $1,612,500. See "Performance Accelerated Restricted Stock Awards."

(9)

On October 1, 1998, Mr. Sargent was awarded 67,500 shares of PARS with a per share value of $17.375. On January 1, 1999, Mr. Sargent was awarded 3,750 shares of PARS with a per share value of $29.125. As of January 29, 2000, these restricted shares owned by Mr. Sargent had a combined total value of $1,531,875. See "Performance Accelerated Restricted Stock Awards."

(10)

On October 1, 1997, Mr. Sargent was awarded 80,623 shares of PARS with a per share value of $12.4722. As of May 1, 1999, these shares were no longer restricted and had a total value of $2,418,690. See "Performance Accelerated Restricted Stock Awards."

(11)

On October 1, 1999, Mr. Mahoney was awarded 45,000 shares of PARS with a per share value of $20.75. As of January 29, 2000, these restricted shares owned by Mr. Mahoney had a total value of $967,500. See "Performance Accelerated Restricted Stock Awards."

(12)

On October 1, 1998, Mr. Mahoney was awarded 67,500 shares of PARS with a per share value of $17.375. As of January 29, 2000, these restricted shares owned by Mr. Mahoney had a total value of $1,451,250. See "Performance Accelerated Restricted Stock Awards."

(13)

On October 1, 1997, Mr. Mahoney was awarded 82,873 shares of PARS with a per share value of $12.4722. As of May 1, 1999, these shares were no longer restricted and had a total value of $2,486,190. See "Performance Accelerated Restricted Stock Awards."

(14)

On October 1, 1999, Mr. Vassalluzzo was awarded 45,000 shares of PARS with a per share value of $20.75. As of January 29, 2000, these restricted shares owned by Mr. Vassalluzzo had a total value of $967,500. See "Performance Accelerated Restricted Stock Awards."

(15)

On October 1, 1998, Mr. Vassalluzzo was awarded 61,249 shares of PARS with a per share value of $17.375. As of January 29, 2000, these restricted shares owned by Mr. Vassalluzzo had a total value of $1,316,854. See "Performance Accelerated Restricted Stock Awards."

(16)

On October 1, 1997, Mr. Vassalluzzo was awarded 62,250 shares of PARS with a per share value of $12.4722. As of May 1, 1999, these shares were no longer restricted and had a total value of $1,867,500. See "Performance Accelerated Restricted Stock Awards."

(17)

On September 1, 1998, Mr. Bingleman was awarded 281,250 shares of PARS with a per share value of $19.4167. As of January 29, 2000, these restricted shares owned by Mr. Bingleman had a total value of $6,046,875. See "Performance Accelerated Restricted Stock Awards."

(18)

Includes reimbursement of $95,886 for relocation expenses.

(19)

Includes payment of $25,420 paid to Mr. Bingleman by Staples' Canadian subsidiary, The Business Depot, Ltd.

(20)

Mr. Bingleman was not granted options or PARS during fiscal 1997 as a result of his assumption of new responsibilities for international operations. Staples developed a long-term compensation strategy for certain international executives, including Mr. Bingleman, that was implemented during fiscal 1998.

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Performance Accelerated Restricted Stock ("PARS") Awards

    In order to maintain Staples' high risk-high reward philosophy, the Compensation Committee adopted, as part of the Amended and Restated 1992 Equity Incentive Plan, a PARS plan (the "Plan") for certain key executives. Under the Plan, shares of Staples RD Stock are granted to executives in consideration for services. The shares are "restricted" in that they may not be sold or transferred by the executive until they "vest." Staples' PARS issued in fiscal 1999 will vest on February 1, 2004 subject to acceleration upon achievement of certain pre-determined earnings per share ("EPS") growth targets over the next two to five fiscal years. Staples' PARS issued in fiscal 1998 will vest on May 1, 2000 as a result of Staples exceeding EPS targets for fiscal 1999.

    Staples' PARS that were issued in fiscal 1997 vested on May 1, 1999 as a result of Staples exceeding target EPS for such PARS for fiscal 1998. EPS growth targets are determined by the Compensation Committee and approved by the Board of Directors each year for grants under the Plan in that year. Once the PARS have vested, they become "unrestricted" and may be freely sold or transferred. Generally, the PARS are forfeited if the executive's employment with Staples terminates prior to vesting.

Option Grants

    The following table sets forth certain information concerning grants of stock options during the fiscal year ended January 29, 2000 for each of the Senior Executives.

OPTION GRANTS IN LAST FISCAL YEAR