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Staples Struggles To Turn Operations Around In Q1

For the first quarter ended May 4, Staples, Inc. reported income from continuing operations of $170.4 million, or 26 cents per diluted share, versus $192.9 million, or 28 cents per diluted share, in the 2012 period. Total company sales were $5.8 billion, a decrease of 3% compared to the 2012 first quarter, Staples stated.

Staples missed a published Thomson Reuters consensus analyst estimate by a penny.

First quarter 2013 total company sales growth was negatively impacted by about 1% due to 97 store closures in North America and Europe during the 12 months preceding the period, Staples asserted. The foreign exchange impact from the stronger U.S. dollar negatively impacted total company sales growth by approximately 50 basis points in the time frame, according to the company.

Operating income rate declined 52 basis points compared with the first quarter of 2012 to 4.9% with investments to accelerate growth and deleverage fixed expenses providing a drag that was partially offset by a favorable comparison to a 2012 period hit by expenses related to headcount reductions and the settlement of a contractual dispute, the company maintained.

First quarter sales in North American stores were $2.8 billion, a decrease of 4% compared to the 2012 period. Sales growth in the quarter declined 1% as Staples closed 48 stores during the preceding 12 months, net of estimated sales transfers to remaining stores. Staples pointed out that the sales decline reflects weakness in computers, business machines, software and technology accessories, partially offset by growth in tablets, facilities and breakroom supplies, and copy and print services. Comparable store sales, excluding sales in, decreased 2%, reflecting a 2% decline in traffic and flat average order size in the quarter year over year. sales gained 3% during the first quarter. Operating income rate decreased 107 basis points to 6.22% versus the first quarter of 2012. This decline primarily reflects investments to drive growth in, deleveraging of fixed expenses and costs associated with optimizing the store labor model in the United States, the retailer related. During the first quarter of 2013, the company closed 11 stores in the U.S. and two stores in Canada.

“We’re gaining momentum in many parts of our business,” said Ron Sargent, Staples’ chairman and CEO said in comments on results. “We’re driving growth online and in categories beyond core office supplies, and we look forward to building on our progress throughout 2013.”