Staples beats forecasts; stock rises on cost savings outlook
NEW YORK - Staples Inc. posted a quarterly profit that edged past analysts' expectations and disclosed an improved cost-savings outlook yesterday, sending its shares up 8 percent.
Staples, the world's largest office products retailer, said it expects to shave $300 million in costs over three years from its recent acquisition of Dutch peer Corporate Express. It had earlier predicted savings of $200 million to $300 million.
Like rivals OfficeMax Inc. and Office Depot Inc., Staples has suffered in recent quarters as many of its small business customers battled a recession, higher commodity costs, a housing slump, and the credit crunch.
Office Depot and OfficeMax both posted losses in the third quarter. Last month OfficeMax predicted a significant sales decline for the rest of the year, while Office Depot said in October it would delay opening new stores.
Also aiding Staples' stock were signs that the integration of Corporate Express is on track and had potential to add meaningfully to the company's future earnings, FTN Midwest Securities analyst Anthony Chukumba said.
Staples also stood by its plans yesterday to open 75 stores in North America next year.
The company said tight expense control would help it tackle a decline in average order size, slower store traffic, and weakness in orders of furniture, business machines, and computers.
"We know from our experience during previous downturns that if we continue to take care of our customers, invest in the business, and control expenses and capital spending, we'll come out on the other side even stronger than before," chief executive Ron Sargent said in a conference call.
For office supply chains, which sell everything from pens and envelopes to computers and furniture, the holiday shopping period is less important than to other chains that may be more gift-oriented.
Staples' net earnings in the third quarter ended Nov. 1 fell 43 percent to $156.7 million, or 22 cents a share, from $274.5 million, or 38 cents a share, a year earlier.
Excluding costs such as charges tied to the Corporate Express purchase, Staples earned 42 cents a share, slightly ahead of analysts' average estimate of 41 cents, according to Reuters estimates.
Staples had forecast 41 cents to 42 cents a share.
Sales rose 34 percent to $6.95 billion.
Excluding sales from Corporate Express, sales fell 3 percent to $5 billion, Staples said. 