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Staples Q2 Income Declines But Beats Wall Street Estimates

For the second quarter, Staples, Inc. posted net income of $82 million, or 13 cents per diluted share, versus $103 million, or 16 cents per diluted share, in the year earlier period. Adjusted net income was $75 million, or 12 cents per diluted share, versus $103 million, or 16 cents per share, in the 2013 second quarter, Staples reported.

Despite the decline, earnings per diluted share still managed to beat a Thomson Reuters average financial analyst estimate of 11 cents.

Total company sales were $5.2 billion, down 2% versus last year’s second quarter, according to Staples. The company added that changes in foreign exchange rates and store closures in North America during the past year took about 1% out of sales.

North American sales decreased 5.8% with comparable store sales down 5% and e-commerce revenues up 8%. Operating income for the division was $28 million versus $100 million in last year’s quarter.

Staples maintained that changes in foreign exchange rates negatively impacted second quarter sales growth by about 1%. Also sales growth took a 2% hit from store closings, the retailer declared. Growth in facilities and breakroom supplies and copy and print services partially offset sales declines in computers and technology accessories, ink and toner, and core office supplies, Staples added.

The comp slide reflected a 4% decline in traffic and a 1% decline in average order size versus the year earlier, the retailer maintained. Additional sales in the company’s expanded assortment in categories beyond office supplies drove gains derived as did increased business customer acquisition and conversion, the retailer related

Operating income rate in North America decreased 290 basis points to 1.22% compared to last year’s second quarter due to lower product margins online and investments to accelerate e-commerce growth and to support company’s strategic reorganization, as well as increased marketing expense and the negative impact of fixed expenses on lower sales, Staples noted. Reduced expenses in retail store operations partially offset the pressure on operating income. In the second quarter, Staples pointed out, it closed 80 stores in North America.

“We’re accelerating growth in our delivery businesses as customers turn to Staples for more products beyond office supplies,” Ron Sargent, Staples’ chairman and CEO, said in announcing the second quarter results. “At the same time, we have more work to do to stabilize our retail business, and we’re taking action to improve customer traffic, reduce expenses and close underperforming stores.”