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AnonymousInactivehttp://www.forbes.com/markets/commodities/2008/05/20/staples-office-closer-markets-equity-cx_mlm_0520markets44.html
Staples Works It Internationally
Staples’
international sales are carrying the company’s balance sheet while
North American consumer spending continues to weaken.On Tuesday, office
products supplier Staples announced increased sales and earnings in
its fiscal first quarter, ended May 3, led by double-digit revenue
growth in its international operations segment.”We are please to
deliver solid results in a challenging quarter,” said Staples chairman
Ronald L. Sargent. “We continue to gain share while we invest in growth
ideas to strengthen our market position.”Staples’s business segments in
North American delivered office products and international sales posted
7.6% and 52.5% gains in the quarter to $163.3 million and $23.8
million, respectively. Still, Framingham, Mass.-based Staples reported
its fourth consecutive quarter of lower sales at established North
American stores, with no signs of a turnaround anytime soon. Same-store
sales for North American retail stores open at least one year, or
comps, fell 11.3% to $168.2 million compared to $189.6 million in the
first quarter last year, reflecting declines in customer traffic and
average order size.Chief operating officer Michael A. Miles Jr.
explained that “customers are behaving cautiously, and are looking for
deals before making purchases for large-ticket items.”A recent
downturn in the United States economy has hit top- and bottom-line
growth for many retailers as deterioration in overall credit markets
curbed consumer spending.Staples reported a 1.5% increase in profits
for the quarter to $212.3 million, or 30 cents per share, on sales of
$4.9 billion, compared to profits of $209.1 million, or 29 cents per
share, on sales of $4.6 billion in the year-earlier quarter.Staples’s
sales and earnings-per-share figures matched estimates made by analysts
polled by Thomson Financial, and profits beat the Street’s quarterly
income estimate of $210.7 million.The company reaffirmed its previous
full-year outlook of mid single-digit sales growth and high
single-digit earnings-per-share growth for 2008. For the second
quarter, Staples expects flat earnings-per-share growth. Analysts
forecast $4.5 billion in sales with profits of $184.3 million, or 26
cents per share.Laptop computers and ink cartridge sales remained
strong in the quarter despite the slowdown in consumer spending, but
orders for office furniture and other business machines continued to
lag. Still, Staples has fared the quasi-recession better than smaller
rivals Office Depot and OfficeMax.Office Depot reported a 2.4%
revenue decrease to $4.0 billion in the quarter ended March 29,
compared to $4.1 billion in the year-earlier quarter. Net income
dropped 55.3% to $66.8 million, or 25 cents per share, down from $153.8
million or 55 cents per share last year. The Delray Beach, Fla.-based
company attributed the significant decline to the disproportionate
impact of housing-related economic conditions to its small business
customer base in Florida and California. These states, the company
said, represent 26% of its total store sales and 35% of total comps.OfficeMax
reported a 4.2% decrease in quarterly sales to $2.3 billion, compared
to $2.4 billion in the year-earlier quarter. Net income did rise 8.2%
to $63.3 million, or 81 cents per share, from $58.5 million, or 76
cents per share, the year earlier. The Naperville, Ill.-based company
conceded that results were not indicative of core performance as
unusual items in the quarter, including income related to its
investment in paper and forest product manufacturer Boise Cascade
Holdings, contributed significantly. Excluding one-time items, net
income would have reduced to just $9.8 million, or 13 cents per share.Staples
recently bid $2.7 billion to acquire rival Corporate Express NV in
hopes of boosting its overseas and contract office supplies business.
Corporate Express, based in The Netherlands, rejected the initial
unsolicited bid of $11.36 (7.25 Euro) per share, and Staples countered
with a $12.53 (8.00 Euro) offer last week on May 13. The Dutch company
maintained its intention to remain independent as it continues a
turnaround plan to rebounds from recent disappointing results.On
Monday, Staples brought its hostile bid directly to Corporate Express
shareholders. The takeover target’s management continued to call the
offer too low and said the price “still significantly undervalues the
company and fails to reflect the company’s prospects.”Staples may have
to raise its bid but in did not specify whether or not it would do so
in Tuesday’s conference call about earnings. Sargent did suggest that
Staples will not stretch the offer past the June 27 end-date it set for
Corporate Express shareholders.“At this point, we’re going to let the
shareholders decide if 8 euros is a fair price, or if they would prefer
to bet on Corporate Express’ turnaround plan for 2011,” Sargent said.
“And if the shareholders reject our offer, then we move on.”Shares of
Staples rose 4 cents, or .2%, to close at $23.61 in trading Tuesday. In
after-hours trading, the stock ticked up another 7 cents to $23.68. -
AuthorJune 16, 2008 at 12:45 PM
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