Staples 2Q profit drops 16 percent

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FRAMINGHAM — Slowing sales, falling foot traffic in North American stores and penny-pinching customers combined to drag down Staples Inc.'s second-quarter profit by 16 percent, but a massive acquisition helped the office-supply chain top revenue expectations.

The world's largest office supply company earned $150.2 million, or 21 cents per share, for the quarter ended Aug. 2. That's down from a year-ago profit of $178.8 million, or 25 cents per share.

Analysts surveyed by Thomson Reuters expected the company to earn 21 cents per share on revenue of $4.69 billion.

Staples said sales jumped 18 percent to $5.07 billion from $4.29 billion during the same period last year. Excluding the benefit of its July acquisition of Dutch supply chain Corporate Express NV, sales rose 3 percent.

Still, same-store sales — an important retail industry metric — fell 7 percent in North America as fewer customers visited the Framingham, Mass.-based company's stores amid a slowing economy. Staples said sales furniture, desktop computers, printers and digital cameras were also weak.

"We're working hard to make sure we keep our eye on the ball to continue to drive performance in all our businesses and manage through a choppy demand environment," Staples' chairman and chief executive, Ron Sargent, told investors during a conference call.

Meanwhile, Staples said it expects low single-digit earnings per share growth for the full year.

Staples' $2.7 billion Corporate Express acquisition is part of a move to expand delivery business in North America, as well as enter new international markets.

Standard & Poors analyst Michael Souers said Wednesday he was reiterating his "Buy" rating on Staples shares along with his 12-month price target of $30.

"We think the environment for both consumer and business spending will remain challenging over the near term," he told investors in a research note. "However, we expect significant synergies from the Corporate Express transaction to drive meaningful (earnings per share) growth despite weak macro conditions."

Staples shares rose 41 cents, or 1.7 percent, to $25.18.

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