Staples Q3 Earnings Match Analyst Estimate, Sales Fall Short

Staples has reported third quarter earnings and the appointment of Tom Conophy as executive vp, chief information officer. For the third quarter ended November 2, Staples GAAP income from continuing operations was $220 million, or 34 cents per diluted share, versus a loss of $569 million, or 85 cents per diluted share, in the year-earlier period, while non-GAAP income from continuing operations was $274 million, or 42 cents per diluted share, versus $310 million, or 46 cents per diluted share, in the 2012 frame.

Non-GAAP earnings exclude the impact of $64 million in pre-tax charges related to employee severance and other associated restructuring activities during the third quarter of 2013, Staples noted.

Earnings matched a Thomson Reuter’s analyst consensus estimate but fell short of its sales assessment.

Total company sales for the quarter were $6.1 billion, down 4% from the 2012 period. Third quarter 2013 total company sales growth slipped 1% due to 107 store closures in North America and Europe during the 12 months preceding, the company pointed out. Foreign exchange rate fluctuation also negatively impacted total company sales growth by 1% in the third quarter, Staples maintained.

For North America, Staples posted third quarter comparable store sales, excluding revenue, down 3% versus the 2012 period, a drop arising from a 3% decline in traffic and flat average order size versus the prior year.

Total sales for the quarter were $3 billion, down 5% compared to the 2012 period. Third quarter 2013 sales growth was negatively impacted by 1% due to 59 store closures prior to the third quarter net of estimated sales transfers to remaining stores. Softer sales also reflected weakness in office supplies, business machines and technology accessories, as well as computers, partially offset by growth in tablets, facilities and breakroom supplies, and copy and print services.

Operating income rate decreased 88 basis points to 9.47% versus the 2012 third quarter, reflecting increased costs related to growth initiatives in, and the negative impact of fixed expenses on lower sales, partially offset by reduced retail store labor and marketing expense. The company closed seven U.S. stores in the 2013 third quarter.

Sales at sales gained 3% versus the third quarter of 2012, with customer traffic advancing and stable customer conversion, partially offset by lower average order size.

“It’s been a year since we announced our strategic reinvention, and we’re evolving our business to meet the changing needs of customers,” said Ron Sargent, Staples’ chairman and CEO in comments on financial results. “We continue to face weak demand for core office supplies, but we’re driving growth online and in new categories, while aggressively managing expenses.”

As for personnel, Conophy will report to Sargent and will serve on the Staples Executive Committee. Before joining the retailer, Conophy was executive vp and chief information officer for InterContinental Hotels Group, Staples related.