* Sees full-year earnings below Wall Street estimates
* Shares down nearly 7 percent
* Quarterly earnings just exceed analysts' view, but sales
* Raises dividend 9 percent to $0.12 per share
By Jessica Wohl and Siddharth Cavale
March 6 Staples Inc, the largest U.S.
office supply chain, forecast weak earnings this year as
corporate customers and other shoppers cut back on buying items
such as computers, and its shares fell nearly 7 percent on
Staples, whose largest rivals are getting ready to merge,
also raised its quarterly dividend by 9 percent to 12 cents per
The company forecast full-year earnings of $1.30 to $1.35
per share, trailing analysts' expectations of $1.43, according
to Thomson Reuters I/B/E/S.
Earnings for the fourth quarter ended Feb. 2 came in just
ahead of Wall Street expectations, but Bernstein analyst Colin
McGranahan said the results were "fairly weak" because they were
bolstered by factors such as lower incentive compensation and
Gross margins remain under pressure, McGranahan said in a
Sales of computers, digital cameras and software continued
to be weak, in part due to a disappointing introduction of
Microsoft Corp's Windows 8, Staples said.
Office supply chains are struggling to fend off Wal-Mart
Stores Inc, Amazon.com Inc and other rivals
that compete on price in selling everything from pens to
furniture to government, businesses and individuals.
As a result, Office Depot Inc and OfficeMax Inc
last month decided to combine in a $976 million
all-stock deal, which is subject to investor and regulatory
Staples started its own overhaul last year and continues to
close some stores, reduce the size of others and take other
steps such as overhauling the selection of products it offers
"We know we have got a lot of work ahead of us, but this
isn't the first time we have transformed Staples to meet the
needs of our customers," Chief Executive Officer Ron Sargent
said during a conference call.
Staples began as a cash-and-carry retailer, or warehouse
type of chain, before expanding into delivery, online ordering
and international markets, Sargent said.
Sargent congratulated his rivals on their proposed merger
and said it was too early to say how much impact it would have.
Citi analyst Kate McShane recently upgraded Staples to
"neutral" due to its potential to benefit from its rivals' deal,
including the lift it could get if those chains close stores in
areas such as the Southeast and Midwest.
"However, we are still neutral to negative on the office
supply industry," she said in a note, citing declines in sales
of paper products, a shift toward lower-margin technology
products, the weak European economy and intensifying online
Many investors look at office-supply retailers as a
barometer of economic health because demand for their products
is closely tied to white-collar employment rates.
Last year, Staples had outlined its plan to cut costs by
closing stores, but that blueprint did not pass muster with some
on Wall Street, who were looking for deeper cuts in North
America and Europe.
The company now sells items ranging from medical and safety
supplies to accessories such as earbuds and covers for Apple Inc
devices. It tripled its online assortment and will also
start opening 12,000-square-foot "omni-channel" stores with
online shopping kiosks this quarter.
Sales at stores open at least a year fell 5 percent in North
America during the fourth quarter, while in Europe they
decreased 9 percent, mainly because fewer customers visited, the
In the United States, Superstorm Sandy cut into
fourth-quarter same-store sales, online sales and sales in the
commercial unit that sells to corporate clients. More
competition at the start of the holiday season also hit
same-store sales, Staples said.
Net income fell to $78.1 million, or 12 cents per share, in
the fourth quarter from $283.6 million, or 41 cents per share, a
Excluding charges for store closings and restructuring, the
company earned 46 cents per share, topping the analysts' average
estimate by 1 cent, according to Thomson Reuters I/B/E/S.
Overall, sales rose 3 percent to $6.56 billion, but missed
Wall Street's average expectation of $6.72 billion.
Shares of Staples were down 6.8 percent at $12.39 in morning