Staples 4Q profit falls on spending pullback

[March 02, 2010]  FRAMINGHAM, Mass. (AP) -- Staples Inc. said Tuesday that its fourth-quarter profit slid as consumers and small businesses continued to delay purchases of larger-ticket office-supply items.

The biggest U.S. office supply company also provided a 2010 adjusted profit outlook below analysts' expectations.

Staples is a good measure of how both consumers and small businesses are responding to the economy since it serves both segments. With the unemployment rate still hovering near 10 percent, many businesses have been slow to hire, making purchases of big-ticket office-supply items unnecessary. Others are putting spending on hold until economic conditions start to improve more.

Its earnings fell 18 percent to $233.9 million, or 32 cents per share, for the period ended Jan. 30. That compares with a profit of $286 million, or 40 cents per share, a year ago.

Removing charges related to several lawsuit settlements and other items, profit was 38 cents per share.

Analysts surveyed by Thomson Reuters, whose estimates normally take out one-time items, forecast a bigger profit of 39 cents per share.

Revenue grew 4 percent to $6.41 billion from $6.17 billion. It was the second consecutive quarter of rising sales and the results topped Wall Street expectations.

Sales of office supplies slowed as both consumers and businesses cut back during the recession. But recently they have begun to report some improvement. Office Depot and OfficeMax both reported moderating sales declines in the fourth quarter.

North American delivery sales dipped 1 percent to $2.4 billion, while North American retail sales climbed 8 percent to $2.6 billion.

Sales at stores open at least a year rose 3 percent on improving traffic and strong sales of computers, ink and toner. This was offset by softness in categories including business machines and furniture.

This figure is a key indicator of a retailers' health as it measures performance at existing stores rather than newly opened ones.

Overseas sales increased 7 percent to $1.4 billion for the quarter.

For the year, Staples' earnings declined 8 percent to $738.7 million, or $1.02 per share, from $805.3 million, or $1.13 per share, in the previous year.

Adjusted profit was $1.14 per share.

Full-year sales increased 5 percent to $24.28 billion from $23.08 billion.

Sales at stores open at least a year fell 2 percent for the year.

Looking ahead to 2010, Staples anticipates an adjusted profit of $1.23 to $1.33 per share, with sales up in the low single-digits.

Analysts predict higher earnings of $1.40 per share for the year.

The company predicts a first-quarter adjusted profit of 25 cents to 27 cents per share, with sales up in the mid single-digits. Wall Street expects 27 cents per share, according to Thomson.

[Associated Press]

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