Staples, Inc. (SPLS), the global leader in the supply of office products, recently reported third-quarter 2009 financial results that surpassed the Zacks Consensus Estimate on the heels of effective cost management.
The quarterly earnings of 39 cents a share beat the Zacks Consensus Estimate by a penny, but were down 7.1% from 42 cents posted in the prior-year quarter. Management now expects earnings in the range of 36 cents to 38 cents for the fourth-quarter 2009.
On a reported basis, including one-time items, earnings came in at 37 cents, up 68.2% from 22 cents delivered in the year-ago quarter. On a reported basis, earnings for the fourth quarter are expected between 34 cents and 36 cents.
Total sales for the quarter tumbled 6.2% year over year to $6,518 million as the deepening recession continued to depress the demand for office products.
However, Staples remained optimistic about its future as it continues to see improving trends in the Catalog business, robust profits from its European office products segment, and an increase in sales in North America. Management expects sales to rise between 1% and 3% in the fourth quarter of 2009.
North American retail sales climbed 1.1% to $2,628.9 million. Comparable store sales remained flat versus prior-year quarter due to traffic improvement and rise in sales of basic items such as ink, toner and computers, offset by sluggish demand registered in business machines, furniture and other durable products.
North American delivery sales dropped 11.1% to $2,474.4 million. International sales also slipped 9.8% to $1,414.7 million. In local currency, sales declined 12%. Comparable store sales in Europe fell 9% due to the decline in average order size and traffic counts, and weakness in durable products, such as computers and furniture.
Staples generated free cash flow of $1.4 billion year-to-date compared to $921 million generated in the same period in the prior year. Free cash flow was used to reduce debt by $400 million during the quarter. Staples has lowered its debt by about $1.9 billion since it acquired Corporate Express.
Staples acquired Corporate Express (leading supplier of office products) in July 2008, and reiterated its cost savings expectation of approximately $300 million yearly from the acquisition.
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