Tuesday, March 4, 2008

Staples Net Income Falls 1% on Lower Retail Sales

By Heather Burke

March 4 (Bloomberg) -- Staples Inc., the world's largest office-supplies retailer, said fourth-quarter profit fell 1 percent on lower North American retail sales to small companies and consumers. Net income declined to $333.2 million, or 47 cents a share, from $336.5 million, or 46 cents, a year earlier, Staples said today in a statement. Profit met some analysts' estimates. Revenue for the three months ended Feb. 2 rose less than 1 percent to $5.32 billion. Staples cut its full-year forecast. Sales at U.S. and Canadian stores open at least a year dropped 6 percent. Office-supply retailers' sales slowed as customers concerned about a declining job market and the worst housing slump in a quarter century reduced purchases of copiers and desks. North American sales have also declined at smaller competitors such as Office Depot Inc. ``The environment is hitting everyone pretty hard,'' Walter Todd, who helps manage $800 million for Greenwood Capital Associates LLC in Greenwood, South Carolina, said yesterday in an interview. ``It's all macro-driven.'' The firm held 175,048 Staples shares as of Dec. 31. The retailer predicted a ``mid single-digit'' percentage increase in sales and ``high single-digit'' percentage growth in earnings per share for the year ending next Jan. 31. Staples said in November that it expects earnings per share this year to increase by a percentage in the ``low teens,'' with ``high single-digit'' sales growth.

Staples Stock

Staples, based in Framingham, Massachusetts, rose 24 cents, or 1.1 percent, to $22.49 yesterday in Nasdaq Stock Market composite trading. The stock lost 2.5 percent of its value this year through yesterday, compared with a 20 percent decline for Office Depot, the second-largest office-supplies retailer. ``In the context of a tough retail environment, we view Staples as relatively stable,'' Jack Murphy, an analyst at William Blair & Co. in Chicago, wrote yesterday in a research note. He rates Staples shares a ``buy.'' Analysts estimated fourth-quarter profit of 47 cents a share, the average projection of 16 analysts surveyed by Bloomberg. Eleven analysts, on average, estimated sales of $5.4 billion. In November, Staples forecast a ``low double-digit'' sales growth in the fourth quarter, with North American same-store sales unchanged or ``slightly negative.''

Corporate Express Bid

Staples last month made an unsolicited offer to buy Corporate Express NV, the world's biggest distributor of office supplies, for 1.33 billion euros ($2.02 billion). Amsterdam- based Corporate Express rejected the proposal, saying in a statement that it ``significantly'' undervalues the company. The takeover of Corporate Express, whose U.S. sales account for more than half its revenue, would bolster Staples' division that sells office supplies directly to companies. Last week Office Depot said fourth-quarter profit plunged 85 percent. Revenue declined both for the North American retail and direct sales divisions and North American same-store sales dropped 7 percent. Chief Executive Officer Steve Odland said U.S. and U.K. sales this quarter-to-date ``remain sluggish.'' The retailer operates more than 2,000 stores worldwide and sells office supplies in 22 countries.

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