*NEWS*STAPLES PROFITS UP 22%

Staples profit rises 22 percent in 4th Q despite slow U.S. sales
FRAMINGHAM—
Staples Inc., the world’s largest office-supplies retailer, said
fourth-quarter profit rose 22 percent on higher revenue from overseas
and the unit that sells directly to corporations. The company said
holiday sales of electronics products such as digital cameras were
disappointing.Sales at North American stores open at least a year rose
1 percent, trailing some analysts’ estimates. Net income climbed to
$336.5 million, or 46 cents a share, from $276.7 million, or 37 cents,
a year earlier, Staples said yesterday in a statement.North American
holiday sales of computers and cameras fell short of the company’s
expectations. The profit gain was driven by a 27 percent jump in
revenue at the international unit, the biggest gain of the company’s
three divisions, and Staples said it would expand in China, India and
other emerging markets.“The holiday shortfall was due to a combination
of more aggressive discounting, especially on technology, and traffic
was not quite as robust as they expected,” said Walter Todd, who helps
manage $850 million Greenwood Capital Associates LLC in South Carolina.
Greenwood has 287,000 Staples shares.

Staples also lifted its
annual dividend by 32 percent to 29 cents a share.Shares of the
company, which operates 1,900 locations, dropped 67 cents, or 2.6
percent, to $25.35 at 4 p.m. in Nasdaq Stock Market composite trading.
They have fallen 5.1 percent this year.Profit and sales exceeded
analysts’ estimates. Revenue for the three months through Feb. 3
increased 18 percent to $5.29 billion, the biggest rise in six years.
Excluding an extra week in the quarter, revenue climbed 10
percent.Fifteen analysts surveyed by Bloomberg estimated on average a
fourth-quarter profit of 45 cents a share, while 11 estimated sales of
$5.19 billion.The North American same-store sales gain was the smallest
since the first quarter and compared with a 3 percent increase a year
earlier. Jack Murphy, a Chicago-based analyst at William Blair &
Co., had estimated a 3 percent rise. Overall North American retail
sales gained 14 percent to $2.92 billion.“The same-store sales miss was
the only negative,” said Joseph Feldman, a New York-based analyst at
Telsey Advisory Group. He has no rating on the shares and doesn’t own
any.Holidays sales “fell short of plan,” Staples said. Some consumers
waited to buy computers until the debut last month of Microsoft Corp.’s
Vista operating system while others “were spending their holiday money
on flat-screen TVs rather than on office technology,” Chief Executive
Officer Ronald L. Sargent, 51, said yesterday.Staples’ stock of
computers was limited because a vendor had a shortage of components.
Same-store sales in Canada were negative because computer prices fell,
Chief Operating Officer Mike Miles said. Sales rebounded in January,
Sargent said. Furniture was also weak.Staples forecast “high
single-digit” sales growth in the first quarter and earnings per share
growth of 15 percent to 20 percent. Analysts estimate 29 cents a
share.The retailer forecast per-share profit, excluding some items, of
as much as $1.49 for the year that ends in 2008. Fourteen analysts
surveyed estimate $1.50, on average.International revenue jumped to
$718.6 million. European same-store sales rose 5 percent.
Comparable-store sales in the U.K. also increased 5 percent, the most
since 2003, helped by higher advertising and direct mail. The European
catalog unit also posted higher profit, especially in France and Italy.