Staples results beat estimates, sees sales rising

NEW YORK/CHICAGO Tue Dec 1, 2009 11:53am EST

A Staples office supplies store is pictured in Burbank, California, May 13, 2008. REUTERS/Fred Prouser

A Staples office supplies store is pictured in Burbank, California, May 13, 2008.

Credit: Reuters/Fred Prouser

NEW YORK/CHICAGO (Reuters) - Staples Inc (SPLS.O) reported third-quarter results that topped analyst estimates and forecast higher sales in the current quarter as trends improve at its North American retail business.

The results, which sent Staples shares to their highest level since September 2008, contrasted those reported by smaller rivals Office Depot Inc (ODP.N) and OfficeMax Inc OMX.N, who both posted sharply lower quarterly sales in October.

Staples continues to gain market share against those two rivals in North America, Sanford Bernstein analyst Colin McGranahan said in a research note.

Traffic in the company's North American stores rose for the first time in nine quarters. Sales at North American stores open at least a year, or same-store sales, were flat in the third quarter after posting declines since last December.

CEO Ron Sargent said initiatives to boost its business in core areas like ink and paper during the recession were paying off with higher same-store sales.

"The North American retail and Staples business delivery (sales) trajectory are encouraging," J.P. Morgan analyst Christopher Horvers said in a note to clients. He added that the profit outlook for the current quarter seems low compared with the company's sales view.

The company also said it had a good start to the holiday shopping season over Thanksgiving weekend, and would ratchet up efforts to lure customers this year with promotions on items like printer ink. Staples cut back on marketing and promotional spending in 2008 in response to a bleak retail environment.

"I think it probably will be a pretty promotional holiday season," Sargent said during a conference call.

Q4 FORECAST IN LINE

Office-supply retailers have suffered in the tough economy as both corporate customers and other shoppers have curbed their appetite for nonessential items, especially expensive goods like furniture and business machines.

Staples said it expects fourth-quarter earnings of 36 cents to 38 cents a share before one-time items, and a sales rise of 1 percent to 3 percent.

Analysts on average were expecting Staples to earn 37 cents a share, according to Thomson Reuters I/B/E/S. They had forecast sales of $6.14 billion, a decline from last year's fourth-quarter tally of $6.17 billion.

Third-quarter net earnings rose to $269.4 million, or 37 cents a share, from $156.7 million, or 22 cents a share, a year earlier.

Excluding one-time items, it earned 39 cents a share in the quarter, which ended on October 31, beating analysts' average forecast of 38 cents.

Sales fell 6 percent to $6.52 billion but beat analysts' average estimate of $6.45 billion.

With its acquisition of Dutch rival Corporate Express in July 2008, Staples stands to gain more than its rivals from any improvement in spending at small businesses and other corporate clients.

The company reaffirmed its expectations for cost savings of $300 million from the Corporate Express acquisition.

Staples' stock, which has risen 14 percent in the last six months, jumped 5.7 percent to $24.65 in late morning trade.

(Reporting by Dhanya Skariachan and Brad Dorfman, editing by Derek Caney, John Wallace, Tim Dobbyn)

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