STAPLES PUSHES THE EASY BUTTON FOR
PROFITS
Earnings grew by
nearly a third for the office supply manager.
Thursday was a rocky day for U.S. stocks, but Staples shares
enjoyed a small gain thanks to strong quarterly earnings and an improved
outlook.During the company’s conference call management said it sees
sequential sales growth across its delivery business and continues to
increase its operating margins, according to TradeTheNews.com. The
company also expects to open about 40 new stores in 2010 and anticipates
better earnings during the year out of its business operations in
China. In terms of the broader economy, it expects the recovery to be
“slow and steady.””I am not an economist, but I am optimistic our
business is coming back just like it did in the last recession,” Staples
Chief Executive Ron Sargent said during the call.
Sales during
the company’s fiscal first quarter, which ended May 1, rose 5.2% to $6.1
billion, from $5.8 billion. Earnings at Staples ( SPLS – news – people )
increased 32% to $188.8 million, or 26 cents per share, from $143
million, or 20 cents per share a year ago. On an adjusted basis,
earnings lifted to 28 cents per share from 22 cents per share. Wall
Street, which typically excludes special items, expected earnings of 27
cents per share on sales of $6.1 billion.“Our first-quarter performance
was strong across the board,” Sargent says, adding that the year got off
to a good start, highlighted sales and profit improvement in all of the
company’s businesses.
Its North American retail and
international segments enjoyed the largest sales gains, as both
increased by 6%, with the domestic gain driven by increased customer
traffic. Some of the details weren’t as strong, though, as same-store
sales in North America rose by only 1%. Nonetheless, Thursday’s report
was a clear improvement from previous releases, as Staples reported in
March that its fourth-quarter profits fell 18% on weak consumer and
business spending. Shares of Staples struggled to stay above water while
the rest of the market wallowed in euro and labor fears. (See “Dow
Tumbles More Than 300 Pointes.”) By late-afternoon trading, though, the
stock managed to eke out a gain of 1.2%, or 25 cents, to $21.79, yet
since the beginning of the year the firm’s shares have fallen 10.9%.
Looking
forward, Staples said it expects only a modest economic recovery in
2010, with second-quarter sales increasing in the low single digits on a
year-over-year basis. Meanwhile, it anticipates earnings to range
between 16 and 18 cents per share, and between 18 and 20 cents per share
on an adjusted basis. Wall Street, for its part, is looking for 20
cents per share.
For the full year Staples also sees a low
single-digit increase in sales from 2009, and expects earnings to range
between $1.20 and $1.28 per share. However, on an adjusted basis it
believes earnings will reach between $1.25 and $1.33 per share. Wall
Street anticipates $1.33 per share.Staples had it easy compared to Sears
Holding , which reported on Thursday that its income fell nearly 40%
on higher costs, leading its stock to tumble 9.4%, or $9.38, to $90.18,
in late-afternoon trading. Elsewhere in the retail segment Thursday
Williams-Sonoma reported better results than The Street projected, and
its stock rallied 4.8%, or $1.35, to $29.79.