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 user 2008-09-03 at 3:10:22 pm Views: 52
  • #20497
    Staples Posts 16% Drop in Net On Tighter Consumer Spending
    Staples Inc. posted a 16% drop in fiscal second-quarter net income, as tighter consumer spending hurt same-store sales, though overall revenue was boosted by the company’s July acquisition of Corporate Express NV.

    The company refrained from again reducing the fiscal-year outlook it cut in August, as Chief Executive Ron Sargent said “We are optimistic about the future for each of our three businesses.”For the quarter ended Aug. 2, the office-products retailer reported net income of $150.2 million, or 21 cents a share, down from $178.8 million, or 25 cents a share, a year earlier. Revenue climbed 18% to $5.07 billion from $4.29 billion. On average, analysts polled by Thomson Reuters recently were looking for earnings of 21 cents a share on $4.69 billion in revenue.

    Earnings also equaled 21 cents a share excluding results from Corporate Express, but sales increased only 3%, to $4.4 billion. Last month, Staples preliminarily said earnings from continuing operations would fall 15% amid 3% sales growth. Gross margin slid to 26.6% from 28.2%.In August, the company said sales in its North American retail segment slid about 1% in the quarter as same-store sales fell 7% — the sharpest drop reported by the company in recent years — amid weak traffic and average order sizes.Wednesday, the company also noted weakness in furniture, desktop computers, printers and digital cameras, which was offset in part by strength in laptops, ink and technology services.

    Helped by revenue from Corporate Express, the North American delivery segment saw sales jump 25%. Excluding Corporate Express, sales climbed 2%, as preliminarily reported in August.International sales surged 69% to $1 billion, also largely thanks to Corporate Express. Staples reported last month that excluding Corporate Express, international revenue jumped about 17%, or 6% in local currencies. Same-store sales in Europe fell 7% because of weak customer traffic and order sizes.

    For the fiscal year, the company confirmed the estimates it gave last month when it cut its view, projecting earnings excluding Corporate Express would be flat on sales growth in the low-single digits on a percentage basis. Wednesday, the company added that including Corporate Express, it expects low single-digit per-share earnings growth. Analysts recently were projecting a 1% rise in earnings from the whole company to $1.44 a share on 20% revenue growth to $23.33 billion.

    In recent quarters, Staples appeared to be weathering the economic downturn. It was controlling expenses and offsetting slow sales in certain segments by brisk sales of items such as laptops and other high-tech business equipment. And in July, Staples bought Corporate Express, marking its largest-ever acquisition — valued at $4.8 billion, including $1.55 billion in debt — which has been expected to stretch the company’s lead in selling office supplies and make it the leader in handling large orders for big businesses.

    But in August, when the company cut its fiscal-year view, Mr. Sargent said soft sales pervaded most aspects of the company’s business, showing Staples isn’t immune to pressures in the office-products sector, amid tightened consumer spending.To help, Staples is targeting price-conscious consumers with promotional deals every week, as opposed to just early in the back-to-school season as in years past. In addition, it has teamed up with top home-goods chain Bed, Bath & Beyond Inc. in a sweepstakes campaign — the company’s largest joint marketing effort with another retailer — to drive traffic and new customers.