STAPLES 2nd Q. PROFITS UP 11%

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Staples 2Q Profit Up 11 Percent
AUG 07 BOSTON- Staples  Inc. on Tuesday said its second-quarter profit rose 11 percent as lower sales of items such as office furniture were offset by gains at its copy and print centers.But the world’s biggest office products supplier slightly pulled back its full-year earnings expectations amid a sluggish North American retail market. Its latest profit increase was largely driven by its overseas and product delivery businesses.Its shares fell 41 cents, or 1.7 percent, to $22.90 in early trading Tuesday.Framingham-based Staples reported net income of $178.8 million, or 25 cents per share for the three months ended Aug. 4 compared with a profit of $161.2 million, or 22 cents per share, a year earlier.

Sales rose 11 percent to $4.29 billion from $3.88 billion a year ago.
The most recent quarter’s results were in line with the consensus forecast of analysts surveyed by Thomson  Financial, who expected net income of 25 cents per share on revenue of $4.3 billion.Sales at North American retail stores open at least a year fell 2 percent in the latest quarter, compared with a 4 percent rise a year earlier.Ron Sargent, Staples’ chairman and chief executive, said the same-store sales decline was driven by a slowdown in consumer spending amid worries about a housing slump, credit crunch and high energy prices.It’s not just us, but other retailers as well,” Sargent told analysts on a conference call. “Consumers are buying less stuff as they worry about the future.”However, Sargent said Staples’ business customer-driven delivery business appeared to be largely immune from the retail slump. Staples’ North American office products delivery business posted a 16 percent sales gain in the most recent quarter.Michael Miles, Staples’ president and chief operating officer, said Staples was “not satisfied with our results this quarter, and we’re working hard to turn our results around.”Staples’ initiatives to attract more customers to its more than 1,900 stores include an expanded loyalty program to reward regular customers with discounts, and enticements to encourage greater sales of ink cartridges.Staples’ chief rival, Office Depot  Inc., last month reported a 5 percent second-quarter decline in same-store North American sales. Another rival, OfficeMax  Inc., reported a 1.6 percent same-store sales gain.Staples’ overall North American sales, including sales from newly opened stores, rose 5 percent in the latest quarter.Staples said sales of office supplies and business machines were slow in the quarter, in addition to furniture. Sales were strong for laptop computers, ink and software, in addition to copy and print services.International sales rose 18 percent, but the gain was a more modest 11 percent accounting for currency fluctuations. International sales at stores open at least a year grew 7 percent.

The company now expects to post earnings growth of about 15 percent for the third quarter and full fiscal year, or about $1.43 per share for the year. In May, Staples had forecast full-year earnings at the low end of a range of 15 percent to 20 percent.Analysts forecast a full-year profit of $1.44 per share, on average. 

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August 22, 2007 at 1:08 PM