Staples Reports Sales of $4.9 Billion in 2nd Quarter

Staples, Inc. released second quarter financial results on Wednesday, August 19.

Total company sales were $4.9 billion, a decrease of 5 percent compared to the second quarter of 2014.

The company reported net income of $36 million, or $0.06 per diluted share.

Second quarter 2015 results on a GAAP basis include pre-tax charges of $24 million related to restructuring and related activities, as well as $34 million related to the acquisition of Office Depot.

Total company sales increased one percent during the second quarter, excluding the impact of store closures in North America during the past year and changes in foreign exchange rates.

“Our second quarter results were in-line with our expectations and reflect steady progress on our strategic reinvention,” said Ron Sargent, Staples’ chairman and chief executive officer. “We continued to drive growth in our delivery businesses and in categories beyond office supplies, and we grew operating income during the second quarter. We remain on track with the acquisition of Office Depot, which we expect to close by the end of 2015.”

Second Quarter 2015 Highlights

• Achieved North American Commercial sales growth of three percent.
• Grew North American copy and print sales in comparable stores, Staples.com and Contract.
• Increased total company gross profit as a percentage of sales by 54 basis points on a GAAP basis, or 44 basis points after excluding a $5 million charge related to inventory write-downs in the prior year.
• Grew operating income in North American Commercial and North American Stores and Online.
• Secured more than $50 million of annualized cost savings during the second quarter of 2015.
• Secured more than $400 million of annualized cost savings since the beginning of 2014, as part of a previously announced plan to eliminate at least $500 million of annualized costs in 2014 and 2015 combined.
• Closed 15 stores in North America during the second quarter of 2015.
• Closed 212 stores in North America since the beginning of 2014, as part of a previously announced plan to close at least 225 stores in 2014 and 2015 combined.

North American sales for the second quarter of 2015 were $2.1 billion, a decrease of 8 percent compared to the second quarter of 2014.

Sales growth was negatively impacted by approximately 4 percent due to store closures during the past year.

Changes in foreign exchange rates also negatively impacted second quarter 2015 sales growth by approximately 3 percent.

Comparable sales, which combines comparable store sales and Staples.com sales growth excluding the impact of changes in foreign exchange rates, decreased two percent versus the prior year.

Sales declines in mobility, business machines, technology accessories, and computers were partially offset by growth in ink and toner, copy and print, and facilities supplies.

Comparable store sales decreased 3 percent, reflecting a 2 percent decline in average order size1 and a percent decline in traffic versus the prior year.

Staples.com sales declined 1 percent in U.S. dollars and grew 1 percent on a local currency basis during the second quarter of 2015.

Operating income rate increased 11 basis points to 1.3 percent compared to the second quarter of 2014. This increase primarily reflects improved product margin rate in retail stores and online, as well as reduced labor, rent and other operating expenses in stores. This was partially offset by the negative impact of lower sales on fixed expenses.

North American commercial sales for the second quarter of 2015 were $2.0 billion, an incre3ase of percent compared to the second quarter of 2014.

This primarily reflects growth in facilities supplies, breakroom supplies, furniture, and promotional products, partially offset by sales declines in ink and toner and paper.

For the third quarter of 2015, the company expects sales to decrease versus the third quarter of 2014.

The company’s guidance reflects a sequential increase in the unfavorable impact of the stronger U.S. dollar on sales and earnings. The company’s earnings guidance excludes any potential impact related to restructuring and other related activities or costs related to the company’s planned acquisition of Office Depot.

For the full year 2015, the company expects to generate more than $600 million of free cash flow.

Staples has its world-wide headquarters in Framingham.