Fourth Quarter Sales Rose One Percent and Diluted EPS Increased Two Percent on a GAAP Basis Fourth Quarter Sales Rose Eight Percent and Diluted EPS Increased 15 Percent on a Proforma Basis Excluding the Extra Week in 2006
Staples, Inc. (NASDAQ:SPLS) announced today the results for its
fourth quarter (13 weeks), and fiscal year (52 weeks) ended February
2, 2008. Including the impact of an extra week of sales in the fourth
quarter of 2006, total company sales grew one percent to $5.3 billion.
North American Retail revenues decreased four percent and North
American Delivery sales increased four percent. International sales
increased 13 percent in US dollars and increased three percent in
local currency. On a GAAP basis, total company net income of $333
million declined slightly from $336 million, and diluted earnings per
share of $0.47 rose two percent compared to the fourth quarter of
2006.
Excluding $370 million of sales recorded during the 14th week in
the fourth quarter of 2006, total company sales for the fourth quarter
increased eight percent to $5.3 billion compared to the same quarter
of 2006. Excluding North American Retail sales of $209 million and
North American Delivery sales of $130 million recorded during the
extra week in the fourth quarter of 2006, North American Retail sales
increased four percent and North American Delivery sales increased 12
percent. Excluding International sales of $31 million recorded during
the extra week in the fourth quarter of 2006, sales grew 18 percent in
US dollars and increased eight percent in local currency. On a
proforma basis to exclude the impact of the 14th week in the fourth
quarter of 2006, diluted earnings per share of $0.47 rose 15 percent
compared to 2006. Comparable store sales for the fourth quarter
decreased six percent in North American Retail, and decreased one
percent in Europe versus last year.
For fiscal year 2007, sales reached $19.4 billion, a seven percent
increase compared to 2006. Full year North American Retail sales rose
one percent and North American Delivery revenues increased 12 percent.
International sales rose 16 percent in US dollars and grew seven
percent in local currency. On a GAAP basis, total company net income
increased to $996 million versus $974 million last year, and diluted
earnings per share of $1.38 rose five percent versus 2006.
Excluding the 53rd week of sales in 2006, total company sales
increased nine percent versus last year, North American Retail sales
increased three percent, North American Delivery revenues increased 14
percent, and International sales grew 18 percent in US dollars or
eight percent in local currency. On a proforma basis to exclude the
impact of the previously disclosed settlement of California wage and
hour class action litigation reported in the third quarter of 2007, as
well as the 53rd week in 2006 and the impact of favorable tax events
and the correction for prior years´ stock-based compensation reported
in the third quarter of 2006, diluted earnings per share increased 15
percent to $1.42. Comparable store sales for the full year decreased
three percent in North American Retail and increased two percent in
Europe versus last year.
"We are pleased to deliver profitable growth in what turned out to
be a challenging 2007," said Ron Sargent, Staples´ chairman and chief
executive officer. "We have a strong team dedicated to doing the right
things for customers while investing in growth ideas."
Key accomplishments in 2007:
Total Company
-- Achieved record sales of $19.4 billion.
-- Opened 159 stores worldwide, ending 2007 operating 2,038
stores.
-- Recorded 2007 total company e-commerce sales of $5.6 billion,
a 14 percent increase versus last year.
-- Announced an agreement with Dell to be the exclusive supplier
of Dell products in the office products channel.
-- Launched "Security by Staples" providing innovative products
and services to help reduce common information security
threats.
-- Continued to increase sales of Staples own brand merchandise,
which now represents 22 percent of total company sales.
-- Generated record free cash flow of $891 million after $470
million in capital expenditures.
-- Returned $958 million to shareholders through $208 million
dividend and $750 million in share repurchases.
North American Retail
-- Achieved record sales of more than $10 billion.
-- Opened 120 stores, which included 11 stores in the Denver
market, our most recent market entry, and closed two stores,
ending the year with 1,738 stores in North America.
-- Opened three stand alone Copy & Print shops in New York City
during 2007 and ended the year with a total of six Copy &
Print shops.
-- Rolled out "Business Cards in Minutes" in copy and print
centers in all US stores.
North American Delivery
-- Achieved record sales of more than $6.6 billion.
-- Increased FY2007 operating income rate in North American
Delivery by 21 basis points to 10.8 percent.
-- Increased North American Delivery e-commerce sales by 14
percent to $5 billion or 75 percent of sales.
-- Added promotional product offering through the strategic
acquisition of American Identity.
-- Opened two new fulfillment centers, in Denver and Nova Scotia,
to support continued growth while maintaining excellent
service.
-- Recognized by J.D. Power and Associates for "outstanding
customer service" in the call centers of all three North
American Delivery businesses.
International
-- Achieved record sales of more than $2.7 billion.
-- Improved International operations operating income rate by 144
basis points to 3.6 percent for the full year.
-- Opened three stores in Portugal, two stores in Netherlands,
one store in Germany and one store in Belgium, and closed
three stores in the UK during 2007, ending the year with 268
stores in Europe.
-- Drove strong top-line growth and operating income rate
expansion while achieving record service levels in European
Catalog.
-- Entered India through a joint venture with Future Group.
-- Announced a joint venture with UPS and opened the first two
StaplesUPS Express stores in China and ended the year with a
total of 32 stores in China.
-- Surpassed $200 million in sales in China, more than doubling
2006 performance.
The company also announced an annual cash dividend of $0.33 per
share payable on April 17, 2008, to shareholders of record on March
28, 2008. This represents a 14 percent increase versus 2007.
Outlook
The company expects the weak economic climate to continue
throughout 2008. Based on the cautious outlook, and continued
investment in growth initiatives, the company now expects to achieve
mid single-digit sales growth for 2008. The company expects to achieve
high single-digit earnings per share growth for 2008, excluding the
previously disclosed impact to 2007 earnings for the $38 million
pre-tax charge ($24 million after-tax) related to the settlement of
California wage and hour class action litigation. The company´s
guidance for future periods excludes any potential impact relating to
our previously announced proposal to acquire the ordinary shares of
Corporate Express NV.
Presentation of Non-GAAP Information
This press release presents sales and earnings per share results
both with and without the previously reported expense related to the
settlement of California wage and hour class action litigation during
the third quarter of 2007, as well as the extra week and previously
reported tax rate benefit and stock-based compensation correction
during 2006. The presentation of results that exclude these items are
non-GAAP financial measures that should be considered in addition to,
and should not be considered superior to or as a substitute for, the
presentation of results determined in accordance with GAAP.
Reconciliations of the non-GAAP financial measures to the most
directly comparable GAAP financial measures are provided below under
the heading "Reconciliation of GAAP to Non-GAAP Financial Measures."
Management believes that the non-GAAP financial measures presented in
this press release provide a more meaningful comparison of the
company´s year-over-year performance. Management also uses these
non-GAAP financial measures to evaluate the company´s core operating
results against plan, to compare the company´s performance to that of
its competitors, and to provide earnings guidance to the investing
community.
Today´s Conference Call
The company will host a conference call today at 8:00 a.m. (ET) to
review these results and its outlook. Investors may listen to the call
at http://investor.staples.com.
About Staples
Staples, Inc. invented the office superstore concept in 1986 and
today is the world´s largest office products company. With 76,000
talented associates, the company is committed to making it easy to buy
a wide range of office products, including supplies, technology,
furniture, and business services. With 2007 sales of $19.4 billion,
Staples serves consumers and businesses ranging from home-based
businesses to Fortune 500 companies in 22 countries throughout North
and South America, Europe and Asia. Headquartered outside of Boston,
Staples operates more than 2,000 office superstores and also serves
its customers through mail order catalog, e-commerce and contract
businesses. More information is available at www.staples.com.
Certain information contained in this news release constitutes
forward-looking statements for purposes of the safe harbor provisions
of The Private Securities Litigation Reform Act of 1995 including, but
not limited to, the information set forth under the heading "Outlook"
and other statements regarding our future business and financial
performance. Actual results may differ materially from those indicated
by such forward-looking statements as a result of risks and
uncertainties, including but not limited to: our market is highly
competitive and we may not continue to compete successfully; economic
conditions may cause a decline in business and consumer spending; we
may be unable to continue to open new stores and enter new markets
successfully; our growth may strain our operations; we may be unable
to attract and retain qualified associates; our quarterly operating
results are subject to significant fluctuation; our expanding
international operations expose us to the unique risks inherent in
foreign operations; our business may be adversely affected by the
actions of and risks associated with our third party vendors; our
expanded offering of proprietary branded products may not improve our
financial performance and may expose us to intellectual property and
product liability claims; our debt level and operating lease
commitments may impact our ability to obtain future financing and
continue our growth strategy; our effective tax rate may fluctuate;
our information security may be compromised; various legal proceedings
may adversely affect our business and financial performance; we may
not consummate our proposed acquisition of Corporate Express NV or
realize any benefits if we do complete the acquisition; and those
other factors discussed or referenced in our most recent annual report
on Form 10-K filed with the SEC, under the heading "Risk Factors" and
elsewhere, and any subsequent periodic or current reports filed by us
with the SEC. In addition, any forward-looking statements represent
our estimates only as of the date of this release and should not be
relied upon as representing our estimates as of any subsequent date.
While we may elect to update forward-looking statements at some point
in the future, we specifically disclaim any obligation to do so, even
if our estimates change.
