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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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
Staples.com 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 February 26, 2001, as reported by Nasdaq, was approximately $6.9 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 455,393,581 shares of Staples Retail and Delivery Common Stock and 9,606,314 shares of Staples.com Common Stock, both par value $.0006, outstanding as of March 15, 2001.

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:

    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 1,307 retail stores located in the United States, Canada, the United Kingdom, Germany, the Netherlands and Portugal as of February 3, 2001. In addition, Staples has catalog, electronic commerce and contract stationer businesses.

    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 track the performance of our e-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 track the performance of Staples Retail and Delivery ("Staples RD"), our non e-commerce businesses and a retained interest in Staples.com. For financial reporting purposes, the Company consolidates the operating results of Staples RD and Staples.com. Staples RD's and Staples.com's separate operating results, as presented in Note O of the Consolidated Financial Statements, reflect the effect of the application of certain cash management and allocation policies adopted by the Board of Directors of Staples (the "Board").

    On March 15, 2001, the Board of Directors approved a proposal to seek stockholders' approval to effect a recapitalization by reclassifying the separate series of Staples.com Stock and recombine the two outstanding series of Staples' common stock into a single series of common stock representing all of Staples' businesses. At a meeting of stockholders, Staples' stockholders will be asked to consider and approve a proposal to amend Staples' certificate of incorporation to effect the recapitalization, rename the resulting single series of common stock as "Staples Common Stock" and provide that Staples could only issue common stock in a single series.

    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 businesses, contract stationer operations and a retained interest in Staples.com. This retained interest in Staples.com was approximately 92% at February 3, 2001 and approximately 88% at January 29, 2000.

Staples.com

    Staples.com is creating a 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, Quill.com and StaplesLink.com, are uniquely positioned as web based transaction sites to take maximum advantage of the competitive strengths of Staples and Quill.

Business Strategy

    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; and



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large businesses with more than 500 office workers.

    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 invest in our staffing levels in stores and delivery operations as well as 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 Retail

    Our North American retail operations, consisting of 1,148 stores as of February 3, 2001, 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 and to reduce shrink in our stores. These initiatives cover a wide-range of store operations, including product and service offerings, inventory planning and protection, staffing, customer satisfaction and improvements in store design.

    We are continuing our store growth program. In fiscal year 2000, we opened 166 stores in North America and we intend to open approximately 140 stores during fiscal year 2001. Our store growth strategy combines entries into new markets with filling in existing markets. During the past two years Staples entered into 126 new markets creating more opportunity to fill in those markets in fiscal year 2001. The growth program for fiscal year 2001 will focus primarily on existing markets with fewer new market entries. 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 45 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.

    During fiscal year 2000, Staples began offering customers the ability to purchase products on-line that were not available in our store through electronic kiosks. The customers can pay for the product at the register or through Staples.com and have the product delivered to their home or business.

    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. To meet the needs of the business traveler, Staples also operates four airport stores, each of which are approximately 1,500 square feet.

Contract and Commercial

    Our contract and commercial 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 business 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-sized 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-sized 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.

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Staples.com

    Our three principal web sites, Staples.com, Quill.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.

    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. The site is available in all of our stores through electronic kiosks.

    Quill.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.com offers over 20,000 office products from Quill's direct mail catalogs, including Quill's private label products.

    StaplesLink.com leverages the strength of the Staples brand name in the contract stationer 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 a 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:

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capitalizing on Staples.com's relationship with Staples which provides it with significant competitive advantages;



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aggressively acquiring new business customers and driving 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;



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leveraging high quality and high frequency traffic that is drawn to our web sites;



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taking 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;



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continuing to build our online brands and communicate the benefits and convenience of shopping at our web sites;



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expanding strategic alliances and partnership relationships to build on our business service offerings, gain entry into new markets and drive traffic to our web sites; and



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expanding internationally.

European Operations

    We started doing business in Europe in 1992. As of February 3, 2001, Staples, through its wholly owned subsidiaries, operates 71 stores in the United Kingdom, 54 stores in Germany, 26 stores in the Netherlands and 8 stores in Portugal, with delivery operations for Staples in the United Kingdom and Germany and delivery operations for Quill in the United Kingdom. In fiscal year 2000, we opened 23 stores in Europe and plan to open approximately 20 stores in fiscal year 2001.

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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 match competitive prices. We 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 shop our retail stores or place orders by telephone or via the Internet for delivery. 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 color and self-service copying, overnight mailing, faxing and other print services as well as payroll services, build to order computers, service warranty contracts and other such services for our customers. Many of our products offered on-line, through our web site Staples.com, are now available to our store customers thorough in-store electronic kiosks.

    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 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 is creating a 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.

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

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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.

    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.

    We believe our distribution centers provide us with significant labor and merchandise cost 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 retail operations. We opened distribution centers in Terre Haute, Indiana in January 2000 and Rialto, California in January 1999, Killingly, Connecticut in January 1998 and Hagerstown, Maryland in March 1997. These four facilities support our U.S. retail operations.

    To support our North American delivery operations, Staples opened distribution centers in two new markets, London, Ohio and Ontario, California, during fiscal year 2000. In fiscal year 1999, Staples opened distribution centers in Stockton, California, Charlotte, North Carolina, and Vancouver, Canada, to support the catalog, contract and Staples.com businesses.

    Staples.com maintains no inventory but instead sells products carried 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.

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Marketing Strategy

    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 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 2000, we continued to invest in our nationally recognized television campaign and continued 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.

    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. Our offline marketing includes traditional advertising on television, direct mail 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. In marketing to StaplesLink.com's large business customers, we utilize Staples contract stationers' sales force. 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

    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 graphically designates 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.

    In our stores 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 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, where market conditions warrant, expanded copy centers. Our current

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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 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.

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

    Staples.com's 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 Maryland and Massachusetts. The associated Staples systems hardware resides at Staples facilities in Framingham, Massachusetts and Quill facilities in Lincolnshire, Illinois. To provide for high availability of its web systems, Staples.com has implemented systems that distribute incoming customer requests across multiple web servers, and ensured that many of the individual components of its web sites are maintained in duplicate or greater so that it has another substitute unit available in the event one fails.

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 various functions, including financial and accounting services, information system services, some selling and marketing activities, some merchandising and replenishment services, transportation and warehouse management services, some 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 by purchasing Staples RD Stock through an employee stock purchase plan. In addition, Staples grants Staples RD and

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Staples.com stock options and Staples RD restricted stock to certain of its associates as an incentive to attract and retain such associates.

    As of February 3, 2001, Staples employed 29,295 full-time and 24,163 part-time associates.

Expansion Strategy

    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 enters 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 140 stores in North America and approximately 20 stores in Europe in fiscal 2001. 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.

    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.

    We plan to continue to expand our Internet operation, Staples.com, during fiscal year 2001. We will continue to dedicate investments in personnel, technology and marketing. We recognize the long-term potential of electronic commerce and plan to continue to aggressively address this market.

Competition

    We compete with a variety of retailers, dealers and distributors in the highly competitive office products market. Primary competitive factors in our markets include brand recognition, selection, convenience, price, accessibility, depth, breadth and presentation of site content, customer service, and reliability and speed of order shipment.

    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, with respect to our retail and delivery business, 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. Staples.com currently competes 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.

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    We believe that we currently compete favorably with respect to each of the above factors. 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.

Trademarks

    The Company has registered the marks "Staples", "Staples the Office Superstore", "Staples.com", "Staples National Advantage", "Staples Business Advantage", "Staples Express" and "Quill" on the Principal Register of the United States Patent and Trademark Office; the mark "Staples" in Canada, Germany, the United Kingdom and the CTM which includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden, The Netherlands and the United Kingdom; the mark "Staples the Office Superstore" in Canada; and the mark "Quill" in Canada and the United Kingdom.

Item 2. Properties

    As of February 3, 2001, Staples operated 1,307 superstores in 45 states, the District of Columbia, 10 provinces in Canada, 10 regions in the United Kingdom, 4 regions in Germany, 6 regions in the Netherlands and in Lisbon, Portugal. Staples also operates 37 distribution centers. The following table sets forth the locations of Staples' facilities as of February 3, 2001.

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    Most of the existing stores are leased by Staples with initial lease terms expiring between 2001 and 2023. In most instances, the Company has renewal options at increased rents. Leases for 169 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

    Not applicable.

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 16, 2001, the number of holders of record of Staples RD Stock was 8,913 and the number of holders of record of Staples.com Stock was 450.

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    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.

    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.

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.

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

    The 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 2001 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

    The information required by this Item will appear under the heading "Directors and Executive Officers of Staples—Executive Compensation" in the Company's Proxy Statement, which section is incorporated herein by reference.

13

Item 12.  Security Ownership of Certain Beneficial Owners and Management

    The information required by this Item will appear under the heading "Beneficial Ownership of Common Stock" in the Company's Proxy Statement, which section is incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions

    The information required by this Item will appear under the heading "Directors and Executive Officers of Staples—Certain Relationships and Related Transactions" in the Company's Proxy Statement, which section is incorporated herein by reference.

PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)

Index to Consolidated Financial Statements.

1.

Financial Statements. The following financial statements and schedules of Staples, Inc. are included as Appendix C of this Report:

2.

Financial Statement Schedules

    All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are not applicable, and, therefore, have been omitted.

3.

Exhibits. The exhibits which are filed with this report or which are incorporated herein by reference are set forth in the Exhibit Index on page E-1.

(b)

Reports on Form 8-K.

    Not applicable.

14

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 16, 2001.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated above.

15

16

APPENDIX A

STAPLES, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS⁽¹⁾

(Dollar Amounts in Thousands, Except Per Share Amounts)

(1)

On May 21, 1998, the Company acquired Quill Corporation ("Quill"). This transaction has been accounted for using the pooling of interests method. As a result, the financial information shown above has been restated to include the accounts and results of operations of Quill for all periods presented.

A-1

STAPLES, INC. AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS⁽¹⁾ (Continued)

(Dollar Amounts in Thousands, Except Per Share Amounts)

Also, all share numbers and earnings per share data have been restated to give retroactive effect to the three-for-two splits of the Company's common stock effected in January 1999, January 1998, March 1996 and July 1995.

(2)

Beginning in the fourth quarter of fiscal year ending January 29, 2000, historical earnings per share is omitted for Staples Inc. as a result of the approval of the Tracking Stock Proposal which changed Staples' capital structure by creating Staples.com Stock and reclassifying Staples, Inc. common stock as Staples RD Stock. Accordingly, historical earnings per share have been presented for the nine months ended October 30, 1999 and the fiscal years 1998, 1997 and 1996 for Staples, Inc. common stock and for the fiscal year 2000 and the three months ended January 29, 2000 for Staples RD and Staples.com Stock. Staples.com's net loss per share has been retroactively restated to reflect the effect of a recapitalization effected through a one-for-two reverse stock split approved by the Board on March 7, 2000 and effected on April 5, 2000.

(3)

Results of operations for this period includes $205,750,000 of asset impairment and other charges related to the impairment of goodwill and fixed assets associated with Staples Communications and the write-down of investment values in various e-commerce companies. These results also include a $7,250,000 credit related to the reversal of a portion of the store closure charge, taken in fiscal year 1998, see (4), representing stores that the Company will not close due to changes in market conditions.

(4)

Results of operations for this period include a $41,000,000 charge relating to costs incurred in connection with the merger with Quill and a $49,706,000 charge relating to store closure costs.

(5)

Results of operations for this period include a $29,665,000 charge relating to costs incurred in connection with the proposed merger with Office Depot, Inc.

(6)

Pro forma information for periods ending February 1, 1997 through January 30, 1999 includes a provision for income taxes on the previously untaxed earnings of Quill, which had been an S Corporation prior to its acquisition by the Company.

The Company's fiscal year is the 52 or 53 weeks ending the Saturday closest to January 31.

A-2

APPENDIX B

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations

    On November 9, 1999, the stockholders of Staples, Inc. ("Staples" or the "Company") approved a proposal, "the Tracking Stock Proposal," which amended the Company's certificate of incorporation to (i) authorize the issuance of a new series of common stock, to be designated as Staples.com common stock ("Staples.com Stock"), and intended to track the performance of Staples.com, the Company's e-commerce business, (ii) increase the aggregate number of shares of common stock that the Company may issue from 1,500,000,000 to 2,100,000,000, initially comprised of 1,500,000,000 shares of Staples Retail and Delivery common stock ("Staples RD Stock") and 600,000,000 shares of Staples.com Stock, and (iii) re-classify Staples' existing common stock as Staples RD Stock, intended to track the performance of Staples Retail and Delivery ("Staples RD"), which consists of all of the Company's non e-commerce businesses and a retained interest in Staples.com. Despite the Company's intentions, the market value of Staples RD Stock may not track the performance of Staples RD and the market value of Staples.com Stock may not track the performance of Staples.com.

    The change in the capital structure of the Company as a result of the approval of the Tracking Stock Proposal did not result in the distribution or spin-off to stockholders of any of the Company's assets and liabilities and will not affect ownership of its assets or responsibility for its liabilities or those of its subsidiaries. Holders of Staples RD Stock and Staples.com Stock are common stockholders of the Company and as such will be subject to the risks associated with an investment in Staples and all of its businesses, assets and liabilities. The assets the Company attributes to one business are subject to the liabilities of the other business, even if such liabilities arise from lawsuits, contracts or indebtedness attributed to the other business. If the Company is unable to satisfy one business' liabilities out of the assets attributed to it, the Company may be required to satisfy those liabilities with the assets the Company has attributed to the other business. Further, holders of Staples RD Stock and Staples.com Stock will not have any legal rights related to specific assets of either business and in any liquidation will receive a fixed share of the net assets of the Company, which may not reflect the actual trading prices, if any, of the respective businesses at such time.

    Financial effects from one business that affect the Company's consolidated results of operations or financial condition could, if significant, affect the results of operations or financial condition of the other business and the market price of the stock relating to the other business. In addition, net losses of either business and dividends and distributions on, or repurchases of, either class of common stock or repurchases of common stock at a price per share greater than par value will reduce the funds the company can pay on each class of common stock under Delaware Law.

    For financial reporting purposes, the Company consolidates the operating results of Staples RD and Staples.com. Staples RD is comprised of Staples' retail stores, catalog businesses, contract stationer business and a retained interest in Staples.com. Staples RD had a retained interest in Staples.com of approximately 92% at February 3, 2001 and approximately 88% at January 29, 2000. Staples.com includes the operations of Staples' e-commerce sites, Staples.com, Quill.com and StaplesLink.com, and its Canadian e-commerce business.

    Staples RD's and Staples.com's separate operating results, as presented in Note O of the Consolidated Financial Statements, reflect the effect of the application of certain cash management and allocation policies adopted by the Board. While the Company believes such allocations to be reasonable they are not necessarily indicative of, and it is not practical for the Company to estimate, the levels of expenses that would have resulted had Staples RD and Staples.com been operating as independent companies. Staples.com has relied upon Staples RD to provide financing for its operations. Therefore, Staples.com's

B-1

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

financial position is not necessarily indicative of the financial position that would have resulted had Staples.com been operating as an independent company. Staples.com's relationship with Staples RD provides Staples.com with competitive advantages regarding product selection, purchasing power and national distribution capabilities. However, management believes that the level of expenses would not have been materially different if these services had been provided by third parties. Allocation and related party transaction policies adopted by the Board can be rescinded or amended at the sole discretion of the Board without approval by the stockholders, although no such changes are currently contemplated. Any such changes adopted by the Board would be made in its good faith business judgement of the Company's best interests, taking into consideration the interests of all stockholders.

    On March 15, 2001, the Board of Directors approved a proposal to seek stockholders' approval to effect a recapitalization by reclassifying the separate series of Staples.com stock and recombine the two outstanding series of Staples common stock into a single series of common stock representing all of Staples' businesses. At a meeting of stockholders, Staples' stockholders will be asked to consider and approve a proposal to amend Staples' certificate of incorporation to effect the recapitalization, rename the resulting single series of common stock as "Staples common stock" and provide that Staples could only issue common stock in a single series.

Results of Operations

Comparison of Fiscal Years Ended February 3, 2001, January 29, 2000, and January 30, 1999

    General.  The fiscal year ended February 3, 2001 consisted of 53 weeks, while the fiscal years ended January 29, 2000 and January 30, 1999 consisted of 52 weeks.

Sales.

    Sales increased 19% to $10,673,671,000 in fiscal year 2000 from $8,936,809,000 in fiscal year 1999; excluding the additional week in fiscal year 2000, sales increased 17% from fiscal year 1999. Sales increased 25% to $8,936,809,000 in fiscal year 1999 from $7,123,189,000 in fiscal year 1998. Worldwide comparable sales increased 7% in fiscal 2000, excluding the additional week, and 9% in fiscal 1999. Comparable sales include stores open for more than one year plus the Commercial business ("Staples Direct") and the Staples.com and Business Depot web sites. Comparable sales for our retail locations increased 4% in fiscal year 2000, excluding the additional week, and 7% in fiscal year 1999. Worldwide non-comparable store sales represented 58% of the total increase in sales for fiscal 2000 and 48% in fiscal year 1999. Staples had 1,307 open stores as of February 3, 2001, 1,129 open stores as of January 29, 2000 and 913 open stores as of January 30, 1999. The February 3, 2001 total includes 189 stores opened and 11 stores closed during the twelve months ended February 3, 2001.

B-2

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

    Staples RD:  Sales for North American retail increased 17% during fiscal year 2000, increased 23% during fiscal year 1999, and increased 26% during fiscal year 1998. Excluding the additional week in fiscal year 2000, sales for North American retail increased 14%. Staples had 1,148 North American stores open as of February 3, 2001. We increased our North American store base by 157 stores in 2000, by 151 in 1999 and by 155 in 1998.

    Sales for Contract and Commercial increased 3% and 24% for fiscal years 2000 and 1999, respectively. This sales activity reflects revenue growth in Staples Direct of 8% in fiscal year 2000 and 18% in fiscal year 1999 that was driven by an increase in targeted customer marketing, but offset by the migration of customers to the Internet site Staples.com. Excluding the additional week in fiscal year 2000, revenue growth in Staples Direct was 6%. Combined revenue growth for Staples Direct and Staples.com was 35% for fiscal year 2000 and 25% for fiscal year 1999. Excluding the additional week in fiscal year 2000, combined revenue growth for Staples Direct and Staples.com was 32%. Contract division sales, which includes Contract, Quill and Staples Communications, increased 1% for fiscal year 2000 and 28% for fiscal year 1999. Excluding the additional week in fiscal year 2000, sales for the Contract division decreased 1%. This decrease in sales growth reflects the effect of the migration of customers to StaplesLink.com and Quill.com web sites. Growth in the Contract division would have been 13% for fiscal year 2000 and 30% for fiscal year 1999 if the revenues from StaplesLink.com and Quill.com were included. Excluding the additional week in fiscal year 2000, growth in the Contract division would have been 11% if the revenues from StaplesLink.com and Quill.com were included. Contract division sales also reflect a decline in the sales performance of Staples Communications during fiscal year 2000.

    Sales for European Operations increased 48% for fiscal year 2000, increased 42% for fiscal year 1999 and increased 51% for fiscal year 1998. Excluding the additional week in fiscal year 2000, the sales for the European Operations would have increased 45%. This growth was primarily due to an increase in comparative store sales and the addition of 21 stores to the European store base during fiscal year 2000, 65 stores during fiscal year 1999, and 16 stores during fiscal year 1998. The 65 store increase in our European segment in fiscal year 1999 included the acquisition of 42 Office Centre/Sigma stores in the Netherlands, Portugal and Germany in October 1999. In addition to the store sales increase in our European operations, the increase in fiscal year 1999 revenue reflects the rollout of Quill in the United Kingdom in March 1999. Staples RD had 159 European stores open as of February 3, 2001 compared to 138 at January 29, 2000 and 58 as of January 30, 1999.

    Staples.com:  Sales increased 443% in fiscal year 2000 and 459% in fiscal year 1999 due to the significant increase in the Staples.com customer base and repeat purchases from Staples.com's existing customers. Excluding the additional week in fiscal year 2000, Staples.com sales would have increased 426%.

    Gross Profit.  Gross profit as a percentage of sales was 24.1% for fiscal year 2000, 24.8% for fiscal year 1999, and 24.2% for fiscal year 1998. The decrease in the gross profit rate during fiscal year 2000 was largely a reflection of increased shrink costs in Staples' retail operations, a promotional sales environment and the increase in our mix of technology products, partially offset by lower product costs from vendors, increased buying efficiencies, continued supply chain enhancements and the leveraging of fixed distribution center and delivery costs over a larger sales base.

    Operating and Selling Expenses.  Operating and selling expenses, which consist of payroll, advertising and other operating expenses, were 15.4% of sales for fiscal year 2000, 14.5% of sales for fiscal year 1999, and 13.9% of sales for fiscal year 1998. The increase as a percentage of sales for fiscal year 2000 was

B-3

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

primarily due to increased costs of investing in the operations and marketing of Staples.com. Excluding the costs associated with Staples.com, these expenses as a percentage of sales would have been 14.6% of sales for fiscal year 2000, 14.3% of sales for fiscal 1999, and 13.9% of sales for fiscal year 1998. The increase as a percentage of sales during the fiscal year 2000 reflects increased selling costs at the store level associated with more complex products and deleveraging of expenses from lower sales volumes on a per store basis. This was partially offset by the continued efficiency in store and delivery operating costs.

    Pre-opening expenses.  Pre-opening expenses relating to new store openings, consisting primarily of salaries, supplies, marketing and distribution costs, are expensed by Staples as incurred and therefore fluctuate from period to period depending on the timing and number of new store openings. Pre-opening expenses averaged $118,000 per store for the stores opened during fiscal year 2000, $94,000 per store for the stores opened during fiscal year 1999, and $80,000 per store for stores opened during fiscal year 1998. The increase in pre-opening expenses largely reflects the increased costs associated with opening stores in remote locations.

    General and Administrative.  General and administrative expenses as a percentage of sales were 3.8% for fiscal year 2000, 4.0% for fiscal year 1999, and 4.2% for fiscal year 1998. Excluding the impact of Staples.com, which currently has higher general and administrative expenses as a percentage of sales than Staples RD, general and administrative expenses would have dropped to 3.6% of sales for fiscal year 2000 compared to 3.8% of sales for fiscal 1999 and 4.2% of sales for fiscal year 1998. The decrease as a percentage of sales for fiscal year 2000 compared to fiscal year 1999 was primarily due to Staples' ability to increase sales without proportionately increasing overhead expenses in its core retail and delivery businesses and a reduction in management's variable compensation. The decrease as a percentage of sales for fiscal year 1999 compared to fiscal year 1998 was primarily due to decreased Year 2000 compliance and other information systems costs, synergies realized from the Quill integration and Staples' ability to increase sales without proportionately increasing overhead expenses in its core retail and direct businesses. These decreases were partially offset by costs incurred for Staples Communications which has higher general and administrative expenses as a percentage of sales than Staples' traditional business units.

    Amortization of Goodwill.  Amortization of goodwill totaled $13,628,000 in fiscal year 2000, $12,014,000 in fiscal year 1999 and $3,739,000 in fiscal year 1998. The increase in amortization is due to the goodwill from the acquisitions of Ivan Allen Corporation on November 1, 1998, Claricom Holdings, Inc., now referred to as Staples Communications, on February 26, 1999, and the Sigma Burowelt in Germany, Office Centre in the Netherlands and Office Centre in Portugal on October 6, 1999.

    Asset impairment and other charges.  During the fourth quarter of fiscal year 2000, Staples recognized impairment losses of $205,750,000. The Company has reviewed the recoverability of the carrying value of its intangible and long-lived assets by using expected future cash flows to value the assets' carrying value. The assets that were impaired consisted of the goodwill and fixed assets associated with Staples Communications of $156,286,000. Also included in this charge is the write-down of investment values in various e-commerce companies of $49,464,000 due to an impairment in value that is other than temporary. These write-downs are a result of significant reductions in valuations for Internet stocks, certain companies that discontinued operations and other companies that experienced significant devaluation due to cash restraints and failed business models.

B-4

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

    Merger-Related and Integration Costs.  In connection with the acquisition of Quill, in a pooling of interests transaction during fiscal year 1998, Staples recorded a charge to operating expense of $41,000,000 during fiscal year 1998. The charges reflect transaction costs and costs to integrate all aspects of the Quill business into Staples' delivery business, and include those costs typical in the merging of operations, such as rationalization of facilities, unwinding of various contractual commitments, asset write-downs and other integration costs.

    The merger transaction costs of approximately $10,500,000 consist primarily of fees for investment bankers, attorneys, accountants and other related charges. Included in the integration costs are approximately $7,000,000 of incremental non-shareholder employee retention payments. Contract and lease termination costs of approximately $14,100,000 include the cost to exit duplicative contracts and distribution centers. Specifically, the Company is committed to exit distribution centers that are in locations that are served by both Staples and Quill facilities. The write-down of leasehold improvements of approximately $3,500,000 relates to the impairment of assets at the distribution centers that have been committed to closure. Other merger-related costs of approximately $5,900,000 primarily relate to changes in Quill's accounting policies to conform to that of Staples. The restructuring and merger-related charges were determined based on formal plans approved by the Company's management using the best information available to it at the time. The amounts the Company may ultimately incur may change as the balance of the Company's initiative to integrate the business related to this merger is executed. These accruals were fully utilized during fiscal year 2000 except for net payments under long-term lease obligations.

    During fiscal year 2000, Staples utilized reserves of $9,901,000 related to the Quill merger, $15,858,000 related to the European Office Supply purchase and $3,786,000 related to the Claricom purchase. At February 3, 2001, the remaining accruals were $3,761,000 for the Quill merger, $7,112,000 for the European Office Supply purchase and $0 for the Claricom purchase. All of the remaining costs relate to contract and lease terminations. The Company believes that the accruals relating to contract and lease terminations will be entirely utilized by fiscal year 2004, however, some payments may be made over the remaining lease term.

    Store Closure Charge.  In December 1998, Staples committed to a plan to close and relocate stores which could not be expanded and upgraded to the Company's current store model. In connection with this plan, Staples recorded a charge to operating expense of $49,706,000. This charge includes $29,620,000 for future rental payments under operating lease agreements that will be paid after the store is closed and will not be subsidized by subtenant income, $4,966,000 in fees, settlement costs and other expenses related to store closure and $15,120,000 in asset impairment charges. In 1998, the Company committed to execute lease agreements for the relocation sites during fiscal year 1999 with the stores to be closed and relocated during fiscal years 1999 through 2001. During the first quarter of fiscal year 2000, management decided not to close several stores that were included in the original store closure plan. Accordingly, the Company reversed a portion of the charge in the amount of $7,250,000, representing stores that the Company will not close due to changes in market conditions. Through February 3, 2001, the Company has paid approximately $6,680,000 in costs related to the store closures and $20,656,000 remains accrued for future rental payments, fees, settlement costs, and other expenses related to the store closures.

    Interest and Other Expense, Net.  Net interest and other expense totaled $45,158,000 in fiscal year 2000, $17,101,000 in fiscal year 1999 and $17,370,000 in fiscal year 1998. The interest expense relates primarily to existing borrowings. The increase in the net interest expense during fiscal year 2000 was primarily due to increased borrowings from Staples' revolving credit facility and the issuance of $175,000,000 of floating rate notes on May 24, 2000.

B-5

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

    Income Taxes.  The provision for income taxes as a percentage of pre-tax income was 75.6% for fiscal year 2000, 39.0% for fiscal year 1999 and 39.5% for fiscal year 1998. On a pro forma basis, to reflect a provision for income taxes on previously untaxed earnings of Quill, Staples' effective tax rate would have been 40.1% for fiscal year 1998. The increase in the tax rate in fiscal year 2000 was primarily due to the effect of the asset impairment and other charges taken in fiscal year 2000 that were not benefitted for tax purposes.

Liquidity and Capital Resources

    Staples has traditionally used a combination of cash generated from operations and debt or equity offerings to fund its expansion and acquisition activities. During fiscal years 2000, 1999 and 1998, Staples also utilized its revolving credit facility to support its various growth initiatives.

    Cash flow from operations was $692,000,000 for fiscal year 2000, driven primarily by cash earnings (net income plus depreciation/amortization, asset impairment and other charges and other non-cash expenses) of $522,000,000. The increase in cash flow from operations was offset by merchandise inventories increasing by $50,000,000 during fiscal year 2000. This increase, though offset by lower inventory levels per store, was primarily attributable to a net increase in the number of stores by 178 for fiscal year 2000. The lower inventory per store is primarily achieved due to Staples' continued focus on increasing inventory turnover. Total inventory turnover has improved to 4.4 turns per year for fiscal year 2000 compared to 4.2 turns for fiscal year 1999. The net increase in inventory was funded by corresponding increases in accounts payable. Accounts payable, accrued expenses and other current liabilities increased $158,000,000 during fiscal year 2000 due to increased inventory levels, timing of payments and leveraging of accounts payable. To the extent that Staples' store base matures and becomes more profitable, cash generated from store operations is expected to continue to provide a greater portion of funds required for new store inventories and other working capital requirements.

    On October 27, 2000, Staples entered into an agreement under which two of its operating subsidiaries sell a defined pool of trade accounts receivable to a limited purpose indirect subsidiary of the Company which in turn sells these accounts receivables to another limited purpose indirect subsidiary of the Company that holds these receivables and sells participating interests in such accounts receivable to third party purchasers who, in turn, receive ownership and security interests in those receivables. As collections reduce accounts receivable in the pool, the operating subsidiaries sell new receivables to the limited purpose subsidiaries. The availability under the agreement is $175,000,000. The third party purchasers are entitled to receive a yield on their purchase price at a rate, depending on the identity of the purchaser, equal to either (a) the LIBOR rate plus 1.25% or (b) the rate paid by the purchaser on commercial paper notes issued to fund its receivables purchases from the limited purpose indirect subsidiary of the Company. At February 3, 2001, $111,000,000 was utilized under the agreement. The proceeds from the sales were used to reduce borrowings under Staples' revolving credit facility. Staples retains collection and administrative responsibilities for the participating interests in the defined pool. Staples has entered into a performance undertaking with respect to the performance obligations of its subsidiaries in connection with the agreement.

    Cash used in investing activities of $500,000,000, during fiscal year 2000, consisted primarily of the acquisition of property and equipment of $450,000,000 and the purchase of investments in Internet related companies of $59,000,000. The majority of the property and equipment purchased during fiscal year 2000 was related to the opening of 189 new stores as well as continued expansion of the multi-channel distribution capabilities, the growth of Staples.com and investment in information systems.

B-6

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

    Cash used in financing activities of $35,000,000 includes net proceeds from borrowing of $123,000,000 and proceeds from the sale of capital stock, primarily through the exercise of stock options, of $54,000,000 offset by the purchase of treasury stock of $212,000,000. During fiscal year 2000, Staples utilized borrowings under its $350,000,000 revolving credit agreement of $100,000,000 at February 3, 2001. Staples also has available $200,000,000 on its 364 day revolving credit facility, $55,000,000 on other uncommitted, short-term bank credit lines, $67,500,000 on European lines of credit and $6,700,000 on a Canadian line of credit, with an aggregate outstanding balance of $7,700,000 as of February 3, 2001, resulting in $815,000,000 of total cash and available credit agreements.

    Staples maintains a revolving credit facility, effective through November 2002, with a syndicate of banks which provides up to $350,000,000 of available borrowings. Borrowings made pursuant to this facility will bear interest at either the lead bank's prime rate, the federal funds rate plus 0.50%, the LIBOR rate plus a percentage spread based upon certain defined ratios, a competitive bid rate or a swing line loan rate. This agreement, among other conditions, contains certain restrictive covenants, including net worth maintenance, minimum fixed charge interest coverage and limitations on indebtedness and sales of assets.

    On May 24, 2000, Staples issued notes in the aggregate principal amount of $175,000,000. The notes bear interest at a rate equal to the three month LIBOR plus 85 basis points, or 7.6% at February 3, 2001, and are due on November 26, 2001.

    On June 26, 2000, Staples entered into a 364 day revolving credit facility, with a syndicate of banks, which provides up to $200,000,000 of borrowings. Borrowings made pursuant to the facility will bear interest at either (a) the higher of the lead bank's prime rate or the federal funds rate plus 0.50%, with such rate in both cases to be increased by 0.125% when the outstanding balance under the facility exceeds $100,000,000, or (b) the LIBOR rate plus a percentage spread based upon certain defined ratios. The agreement, among other conditions, contains certain restrictive covenants, including net worth maintenance, minimum fixed charge coverage and limitations on indebtedness and sale of assets.

    For fiscal year 2000, Staples extended its stock repurchase program that is intended to provide shares for employee stock programs. During fiscal year 2000, Staples repurchased 8,897,500 shares for $182,700,000 under this program. This amount includes the purchase of 2,600,000 shares for $78,700,000 on July 3, 2000, to settle an equity forward purchase agreement. The agreement was used to hedge against stock price fluctuations for the repurchase of Staples' common stock in connection with the annual stock option grant to employees and directors.

    Staples opened 189 stores and closed 11 stores in fiscal year 2000, opened 175 stores and closed one store in fiscal year 1999, and opened 174 stores and closed three stores in fiscal year 1998. Staples expects to open approximately 160 stores during fiscal year 2001. Staples estimates that its cash requirements, including pre-opening expenses, inventory, leasehold improvements and fixtures, will be approximately $1,500,000 for each new store (excluding the cost of any acquisitions of lease rights). Accordingly, Staples expects to use approximately $240,000,000 for store openings during this period. Staples also plans to continue to make investments in information systems, distribution centers and store remodels to improve operational efficiencies and customer service, and may expend additional funds to acquire businesses or lease rights from tenants occupying retail space that is suitable for a Staples store. Staples expects that its cash generated from operations, together with its current cash and funds available under its revolving credit facility will be sufficient to fund its planned store openings and other recurring operating cash needs for at least the next twelve to eighteen months. Staples continually evaluates financing possibilities, and it may seek to raise additional funds through any one or a combination of public or private debt or equity-

B-7

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

related offerings, depending upon market conditions, or through an additional commercial bank debt arrangement.

Inflation and Seasonality

    While neither inflation nor deflation has had, and Staples does not expect it to have, a material impact upon operating results, there can be no assurance that our business will not be affected by inflation or deflation in the future. We believe that our business is somewhat seasonal, with sales and profitability slightly lower during the first and second quarters of our fiscal year.

Future Operating Results

    This annual report on Form 10-K includes or incorporates forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these forward-looking statements by the use of the words "believes", "anticipates", "plans", "expects", "may", "will", "would", "intends", "estimates" and other similar expressions, whether in the negative or affirmative. Staples cannot guarantee that it actually will achieve the plans, intentions or expectations disclosed in the forward looking statements made. Staples has included important factors in the cautionary statements below that it believes could cause actual results to differ materially from the forward-looking statements contained herein. The forward-looking statements do not reflect the potential impact of any future acquisitions, mergers or dispositions. Staples does not assume any obligation to update any forward-looking statements contained herein.

    Staples' market is highly competitive and it may not continue to compete successfully.  Staples competes in a highly competitive marketplace with a variety of retailers, dealers and distributors. In most of Staples' geographic markets, it competes with other high-volume office supply chains, such as Office Depot, OfficeMax and Office World, that have store formats, pricing strategies and product selections that are similar to Staples'. Staples also competes with mass merchants, such as Wal-Mart, warehouse clubs, computer and electronic superstores, and other discount retailers. In addition, Staples' retail stores, delivery and contract businesses and Staples.com compete with numerous mail order firms, on-line office supply and service providers, contract stationer businesses and direct manufacturers. Many of Staples' competitors, including Office Depot, OfficeMax and Wal-Mart, have in recent years significantly increased the number of stores they operate within Staples' markets. Some of Staples' current and potential competitors are larger than Staples and have substantially greater financial resources. It is possible that increased competition or improved performance by Staples' competitors may reduce its market share, may reduce Staples' profit margins, and may adversely affect Staples' business and financial performance in other ways.

    Staples may be unable to continue to successfully open new stores.  An important part of Staples' business plan is to aggressively increase the number of its stores. Staples opened 189 stores in the United States, Canada and Europe in fiscal 2000 and plans to open approximately 160 new stores in fiscal 2001. For Staples' growth strategy to be successful, it must identify and lease favorable store sites, hire and train employees and adapt the Company's management and operational systems to meet the needs of our expanded operations. These tasks may be difficult to accomplish successfully. If Staples is unable to open new stores as quickly as it plans, the Company's future sales and profits could be materially adversely affected. Even if Staples succeeds in opening new stores, these stores may not achieve the same sales or profit levels as Staples' existing stores. Also, Staples' expansion strategy includes opening new stores in markets where Staples already has a presence so that it can take advantage of economies of scale in

B-8

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

marketing, distribution and supervision costs. However, these new stores may result in the loss of sales in existing stores in nearby areas.

    Staples' quarterly operating results are subject to significant fluctuation.  Staples' operating results have fluctuated from quarter to quarter in the past, and it expects that they will continue to do so in the future. Staples' earnings may not continue to grow at rates similar to the growth rates achieved in recent years and may fall short of either a prior fiscal period or investors' expectations. Factors that could cause these quarterly fluctuations include the following:

•

the number of new store openings, primarily because the Company expenses pre-opening costs as incurred and newer stores are less profitable than mature stores;



•

the extent to which sales in new stores result in the loss of sales in existing stores;



•

the mix of products sold;



•

pricing actions of competitors;



•

the level of advertising and promotional expenses;



•

seasonality, primarily because the sales and profitability of the Company's stores are typically slightly lower in the first and second quarter of its fiscal year than in third and fourth quarters; and



•

charges associated with acquisitions.

    Most of the Company's operating expenses, such as rent expense, advertising expense and employee salaries, do not vary directly with the amount of its sales and are difficult to adjust in the short term. As a result, if sales in a particular quarter are below the Company's expectations for that quarter, it could not proportionately reduce operating expenses for that quarter, and therefore this sales shortfall would have a disproportionate effect on the Company's expected net income for the quarter.

    Staples' stock price may fluctuate based on the expectations of professional security analysts.  The public trading price of Staples RD Stock is based in large part on professional securities analysts' expectations that its business will continue to grow and that the Company will achieve certain levels of net income. If Staples' financial performance in a particular quarter does not meet the expectations of securities analysts, this may adversely affect the views of those securities analysts concerning the growth potential and future financial performance of Staples. If the securities analysts that regularly follow Staples RD Stock lower their rating or lower their projections for future growth and financial performance, the market price of Staples RD Stock is likely to drop significantly. In addition, in those circumstances, the decrease in the stock price may be disproportionate to the shortfall in the Company's financial performance.

    Staples' rapid growth may continue to strain operations, which could adversely affect the business and financial results.  Staples' business, including sales, number of stores and number of employees, has grown dramatically over the past several years. In addition, Staples has acquired a number of significant companies in the last few years and may make additional acquisitions in the future. This growth has placed significant demands on the Company's management and operational systems. If Staples is not successful in upgrading its operational and financial systems, expanding its management team and increasing and effectively managing its employee base, this growth is likely to result in operational inefficiencies and ineffective management of Staples' businesses and employees, which will in turn adversely affect the Company's business and financial performance.

B-9

STAPLES, INC. AND SUBSIDIARIES

Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)

    Staples' European operations may not become profitable.  Staples currently operates in European markets through Staples UK in the United Kingdom, Staples Deutschland in Germany and Office Centre in the Netherlands and Portugal. Consolidated European operations are currently unprofitable, and Staples cannot guarantee that they will become profitable. Staples may seek to expand into other international markets in the future. Staples' foreign operations encounter risks similar to those faced by its North American stores, as well as risks inherent in foreign operations, such as local customs and competitive conditions and foreign currency fluctuations.

    Staples' e-commerce business is currently experiencing operating losses.  Staples.com includes the operations of Staples' e-commerce sites, Staples.com, Quill.com, StaplesLink.com, and its Canadian e-commerce business. Staples.com is currently unprofitable. Staples cannot guarantee that Staples.com will become profitable.

    Staples may be unable to obtain adequate future financing.  It is possible that Staples will require additional sources of financing earlier than anticipated, as a result of unexpected cash needs or opportunities, an expanded growth strategy or disappointing operating results. Additional funds may not be available on satisfactory terms when needed, whether within the next twelve to eighteen months or thereafter.

Euro Currency

    On January 1, 1999, certain member countries of the European Union established fixed conversion rates between their existing currencies and the European Union's common currency, ("the euro"). The former currencies of the participating countries are scheduled to remain legal tender as denominations of the euro until January 1, 2002 when the euro will be adopted as the sole legal currency.

    Staples has evaluated the potential impact of the euro on its business, including the ability of its information systems to handle euro-denominated transactions and the impact on exchange costs and currency exchange rate risks. The conversion to the euro is not expected to have a material impact on Staples' operations or financial position.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risks

    Staples is exposed to market risk from changes in interest rates and foreign exchange rates. Staples initiated a risk management control process to monitor the interest rate and foreign exchange risks. The risk management process uses analytical techniques including market value, sensitivity analysis, and value at risk estimates. Staples does not believe that the potential exposure is significant in light of its size and its business. Staples uses interest rate and currency swap agreements for purposes other than trading and they are treated as off-balance sheet items. Staples uses interest rate swap agreements to modify fixed rate obligations to variable rate obligations, thereby adjusting the interest rates to current market rates and ensuring that the debt instruments are always reflected at fair value. Staples is exposed to foreign exchange risks through subsidiaries in Canada, the United Kingdom, Germany, the Netherlands, Portugal and Belgium. Staples has entered into derivative financial instruments, as noted below, to partially hedge its foreign exchange exposure, and Staples believes the remaining potential exposure is not material to its overall financial position or its results of operations.

    On May 11, 1999 and August 3, 1999, Staples entered into interest rate swaps, each for an aggregate notional amount of $100,000,000, in order to minimize financing costs associated with its $200,000,000 of 7.125% senior notes due August 15, 2007. The swap agreements are both scheduled to terminate on August 15, 2007. Under the interest rate swap agreements, Staples is entitled to receive semi-annual

B-10

interest payments at a fixed rate of 7.125% and is obligated to pay interest based on a 30 day Non-Financial US Commercial Paper Rate plus an average of 69 basis points, approximately 6.25% at February 3, 2001. The interest rate swaps are being accounted for as a hedge and the differential to be paid or received on the interest rate swap agreements is accrued and recognized as an adjustment to interest expense over the life of the agreements. If Staples and the counterparty to the agreements terminate the swaps prior to their original maturity, any gain or loss upon termination will be amortized to interest expense over the remaining original life of the agreements.

    Staples issued notes in the aggregate principal amount of 150,000,000 euro on November 15, 1999. Net proceeds of approximately $148,000,000 were used to fund international expansion. These notes bear interest at a rate of 5.875% per annum and are due on November 15, 2004. These notes have been designated as a foreign currency hedge on Staples' net foreign investments in Europe and gains or losses are recorded in the cumulative translation adjustment line in stockholders' equity.

    On November 15, 1999, Staples entered into an interest rate swap for an aggregate notional amount of 150,000,000 euro in order to minimize financing costs on the notes issued the same date. The swap agreement is scheduled to terminate on November 15, 2004. Under the interest rate swap agreement, Staples is entitled to receive annual interest payments at a fixed rate of approximately 5.875% and is required to make quarterly interest payments at a floating rate of the one month EURIBOR plus 1.1175%, currently approximately 5.89%. Staples has designated its 150,000,000 euro notes and its interest rate swap agreement to be an integrated transaction. Accordingly, the interest rate swap agreement is being accounted for as a hedge and the differential to be paid or received on the interest rate swap agreements is accrued and recognized as an adjustment to interest expense over the life of the agreement.

    On May 3, 2000, Staples entered into a currency swap on its $200,000,000 of 7.125% senior notes issued on August 12, 1997. The Company has swapped the dollar-denominated principal and interest into Canadian dollar denominated obligations of 295,290,000 in Canadian dollars at an interest rate of 6.445%. This swap has been designated as a foreign currency hedge on Staples' net investment in Canadian dollar denominated subsidiaries and gains or losses will be recorded in the cumulative translation adjustment line in stockholders' equity.

    This risk management discussion and discussion of the effects of changes in interest rates and foreign exchange rates, are forward-looking statements. Actual future results may differ materially from these projected results due to developments in the global financial markets. The analytical methods used by Staples to assess and mitigate risk discussed above should not be considered projections of future events or losses.

B-11

APPENDIX C

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

C-1

Report of Independent Auditors

Board of Directors of Shareholders

Staples, Inc.

    We have audited the accompanying consolidated balance sheets of Staples, Inc. and subsidiaries as of February 3, 2001 and January 29, 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended February 3, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Staples, Inc. and subsidiaries at February 3, 2001 and January 29, 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended February 3, 2001 in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP
Ernst & Young LLP

Boston, Massachusetts
March 2, 2001,
except for Note S,
as to which the date
is March 15, 2001

C-2

STAPLES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar Amounts in Thousands, Except Share Data)

See notes to consolidated financial statements.

C-3

STAPLES, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Share Data)

See notes to consolidated financial statements.

C-4

STAPLES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Dollar Amounts in Thousands, Except Share Data)
For the Fiscal Years Ended February 3, 2001, January 29, 2000, and January 30, 1999