Staples 3rd-quarter profit surges 72 percent, helped by lower charges

Staples 3Q profit climbs on lower charges

NEW YORK — Staples Inc., the largest U.S. office supply retailer, was upbeat outlook Tuesday as it reported that its customers bought more school and office supplies and technology products in its stores in the third quarter.

Staples North American retail sales rose 1 percent to $2.6 billion in the third quarter, the first time in five quarters that they rose from a year earlier.

The company expects its total sales to rise in the current quarter, and its shares climbed 4 percent Tuesday morning.

“I think there’s cause to be optimistic about the direction of the economy, but it all hinges to me on job growth,” CEO Ron Sargent said on a conference call. “As it relates to Staples, we are seeing nice recovery in our stores and we’re starting to see the pickup in our catalog business, but not as much in contract (sales), and I think if people aren’t working they aren’t consuming office supplies.”

The improvement in North American sales is encouraging because consumers have been buying less office and school supplies during the recession, dampening sales at retailers like Staples, Office Max and Office Depot.

Sales in North American Staples stores open at least one year — considered a key indicator of a retailer’s financial health — were flat compared with the third quarter of 2008, also the first non-decline in nine quarters, and customer traffic rose.

Computer ink and toner sold well, but sales of durable goods such as business machines and furniture remained weak, the company said.

Deutsche Bank analyst Mike Baker said Staples appeared to be gaining market share from smaller rivals Office Depot Inc. and Office Max Inc., which both reported weaker sales than Staples in their stores open at least one year. The first is a key indicator of a retailer’s financial health because it excludes stores that open or close during the year.

Staples earned $269.4 million, or 37 cents per share, for the quarter that ended Oct. 31, up 72 percent from $156.7 million, or 22 cents per share, a year earlier. Excluding integration and restructuring costs of $16 million, it made 39 cents per share, just beating the average forecast of 38 cents per share from analysts polled by Thomson Reuters.

Staples acquired Dutch office supply company Corporate Express NV in July 2008 for $2.7 billion. It said average orders from Corporate Express have since risen to $180 from $160. Average orders at Staples are about $220.

The retailer, which is based in Framingham, Mass., said sales slipped 6 percent to $6.52 billion from $6.95 billion. That beat the $6.45 billion Wall Street expected.

Staples’ North American delivery sales fell 11 percent in the quarter to $2.5 billion, and its international sales dropped 10 percent to $1.4 billion.

Staples anticipates an adjusted fourth-quarter profit of 36 cents to 38 cents per share. Analysts forecast 37 cents per share. The company expects total sales to rise between 1 percent and 3 percent.

Staples shares rose 88 cents, or 3.7 percent, to $24.19 during morning trading, after touching a 52-week high of $24.24. The stock has traded between $14.35 and $23.74 over the past year.

(This version CORRECTS 5 quarters sted 9 in second graf)