Staples reports stunning growth

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1 March 2007 — Framingham (MA): Staples’ total company Q4 sales grew 18 percent to $5.3 billion compared to the same quarter of 2005.

North American Retail revenues rose by 14 percent and North American Delivery sales went up by 24 percent. International sales grew 16 percent in local currency or 27 percent in US dollars.

 

Total company net income rose 22 percent to $336 million or diluted EPS of $0.46. North American Retail same-store sales, calculated on a 13 week basis, rose 1 percent versus last year and in Europe, same-store sales increased by 5 percent.

 

Excluding $370 million of total company sales during the extra week in the fourth quarter, sales increased 10 percent compared to last year.

 

Excluding North American Retail sales of $210 million and North American Delivery sales of $129 million during the extra week in the fourth quarter, North American Retail sales increased six percent and North American Delivery revenues increased 14 percent.

 

Excluding International sales of $31 million during the extra week in the fourth quarter, sales grew 11 percent in local currency or 22 percent in US dollars.

 

For fiscal 2006, sales reached $18.2 billion, a 13 percent increase compared to 2005. Full year North American Retail sales rose 10 percent and North American Delivery revenues increased 19 percent.

 

In 2006, eCommerce sales of $4.9 billion increased 28 percent versus last year. International sales rose 10 percent in local currency or 13 percent in US dollars.

 

The company reported 2006 net income of $974 million, a 24 percent increase versus last year. Diluted EPS of $1.32 rose 27 percent versus 2005.

 

Adjusted for the impact of favourable tax events and the correction for prior years’ stock-based compensation reported in Q3, EPS were $1.28.

 

Both North American Retail and European same-store sales, calculated on a 52 week basis, increased 3 percent for the year. The company generated $637 million in free cash flow after $528 million in capital expenditures.

 

Excluding the 53rd week in 2006, total company sales increased 11 percent versus last year. Excluding the extra week, North American Retail sales increased 8 percent, North American Delivery revenues increased 16 percent, and International sales grew 8 percent in local currency, or 11 percent in US dollars.

 

CEO Ron Sargent said: "Our 74,000 associates delivered another terrific year in 2006. We drove strong top and bottom line growth, while investing in new ideas and making steady progress on the key initiatives that will continue to drive our business."

 

The retailer’s own-brand products reached 20 percent of sales for the year and the company established a long-term goal to reach 30 percent of sales.

 

2006 operating margin in North American Retail increased 30 basis points to 9.6 percent.

 

In Q4, the company says it experienced positive customer traffic and solid performance in key categories, such as office supplies, ink, as well as copy and print.

 

The company says it continues to increase sales to existing customers through "share of wallet" initiatives.

 

2006 operating margin in North American Delivery increased 40 basis points to 10.7 percent.

 

International operations improved operating margin by 149 basis points to 2.1 percent for the full year. Staples reported that new advertising and direct mail campaigns are showing positive results in European retail.

 

In Q4, Staples’ same-store sales in European retail rose 5 percent, with 5 percent same-store sales in the UK, its best quarterly performance since 2003.

 

In Q4 and FY2006, Staples European Catalogue drove strong sales and doubled operating margin, with particularly solid improvement in France and Italy.

 

During the quarter OPI exclusively announced the retailer’s joint venture in India with Pantaloon Retail, and plans to acquire Pei Pei, a chain of office products retail stores in the Jiangsu province near Shanghai, China.