Staples Profit Near Flat

Declines in sales at stores open at least a year could continue "well into 2008," according to Staples' chief financial officer.

NEW YORK (Reuters) - Staples, the No. 1 office supply retailer, on Tuesday posted a flat quarterly profit and cut its full-year outlook, citing a weak economic climate.

Declines in sales at stores open at least a year could continue "well into 2008," John Mahoney, Staples chief financial officer, said on a company conference call. 

"When we talked to you last quarter, we believed the slow sales environment might turn around by midyear as the credit crisis looked like it would get cleaned up by then," Mahoney said. "It now looks like it could take a little longer."

Office supply chain revenues have weakened in recent quarters as slowing job growth, the distressed U.S. housing sector and credit market jitters have led small businesses to cut spending. 

Earnings totaled $333 million for the fourth quarter ended February 2, compared with $336 million a year earlier. Per-share earnings rose to 47 cents from 46 cents because of a decline in shares outstanding. The results were in line with Wall Street expectations, according to Reuters Estimates.

Quarterly sales rose to $5.32 billion from $5.29 billion, helped by a favorable currency translation from its overseas operations. 

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North American retail revenue decreased 4 percent while North American delivery sales increased 4 percent. Comparable sales at its North American division fell 6 percent compared with the year-earlier quarter.

International sales increased 13 percent in U.S. dollars and 3 percent in local currency. U.S. companies with overseas operations have benefited from the weakened dollar, which makes foreign revenues worth more when converted from the local currency.

The company also increased its dividend by 14 percent to 33 cents per share.

Staples said it expects to achieve mid-single-digit sales growth for 2008 and high-single-digit earnings-per-share growth for the year. 

In November, Staples had forecast growth in the low teens for earnings per share, excluding items, and in the high single digits for sales. For North American retail, it forecast same-store sales growth in the low single digits.

Staples said it expects fiscal year 2008 earnings per share of $1.42 on $19.45 million in revenue. 

The results were "very respectable. It's a testament to a company that executes extremely well," said Sanford Bernstein analyst Colin McGranahan, "In terms of the outlook, I would be surprised if anyone wasn't expecting a more cautious outlook. We're in a recession."

Staples rival Office Depot last week posted a bigger-than-expected drop in quarterly profit, citing higher expenses and lower North American sales that sent its shares tumbling 8 percent. 

Shares of Framingham, Massachusetts-based Staples were down 48 cents, or 2.1 percent, to $22.01 on the Nasdaq.

(Reporting by Jennifer Coogan, editing by Mark Porter)

Copyright Reuters 2008. All rights reserved.

 

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