*NEWS*STAPLES:69K EMPLOYEES,1,786 STORES

[Anonymous]

Staples 1Q Earnings Increase 26 Percent
BOSTON – Staples Inc. said Tuesday its first-quarter profit rose 26 percent on gains in its office products delivery business and overseas operations.But the world’s largest office products retailer reported disappointing sales growth at its North American stores, and investors sent Staples’ shares down 6 percent.Staples said net income for the three-month period ended April 29 rose to $186.1 million, or 25 cents per share, from a profit of $147.7 million, or 20 cents per share, in the same quarter a year ago. Sales rose 9 percent to $4.24 billion from $3.9 billion a year ago.The most recent quarter’s profit beat the consensus forecast of 23 cents a share by analysts surveyed by Thomson Financial, and the sales result fell just shy of analysts’ forecast of $4.26 billion.Framingham-based Staples said first-quarter sales edged upward 1 percent at North American stores open at least a year, the company’s smallest such increase since 2002’s third quarter. Ron Sargent, Staples’ chief executive and chairman, told analysts in a conference call that the result was “a bit disappointing,” but said the company’s core North American store business remains healthy.Weaker sales of furniture and office technologies such as computers were offset by growth in customer traffic, rising sales of core items including binders and ink cartridges, and increased use of copy and print services.Staples’ shares fell $1.60 to close at $24.82 on the Nasdaq Stock Market, where the stock has traded in a 52-week range of $19.78 to $27.71.AG Edwards & Sons analyst Brian Postol said investors were reacting to Staples’ small North American sales increase, and worries that consumers are putting off purchases of big-ticket items like office furniture and computers.”People may be concerned given the rise in interest rates and gas prices, and they may be feeling pinched a little at this time,” Postol said.Staples’ international sales rose 6 percent based on local currency values, but dipped 1 percent in dollars when accounting for the dollar’s value compared with foreign currencies.International profits tripled in the quarter from $3.5 million to $10.5 million, “reflecting early progress in the company’s European turnaround,” Staples said. The company has recently been hurt by a slow economy in Europe and costs to integrate new operations there, especially in the United Kingdom.Staples’ profit in its North American retail business rose 16 percent to $180 million, with its North American delivery profit growing 25 percent to $130 million.Rising paper costs are pressuring the profitability of Staples’ delivery business, but the company said it expects to pass the higher costs to customers by boosting paper prices.The 69,000-employee company opened just five new North American stores in the first quarter, for a total of 1,786 stores in 21 countries.Despite the slow pace of first-quarter store openings, the 20-year-old company remains on track to meet its goal of 100 new stores for the full year, with the pace of openings accelerating in coming quarters. Staples’ biggest new market is the Chicago area, where it added 25 stores last year.Staples continued to post stronger profits than its chief rivals in the first quarter. Delray Beach, Fla.-based Office Depot last month reported a 12 percent increase in its first-quarter profit, to nearly $130 million. Itasca, Ill.-based OfficeMax Inc. posted a $25 million loss as costs from closing more than 100 stores hurt results.Staples expects second-quarter sales growth in the low double-digits on a percentage basis, and earnings per share growth of 15 percent to 20 percent. For the full year, Staples expects earnings to grow at the high end of the company’s previously stated range of 15 percent to 20 percent.Those profit projections are slightly higher than analysts’ forecasts for a second-quarter profit of 22 cents per share and a full-year profit of $1.25 per share

[Author]

May 17, 2006 at 9:59 AM