) recently posted third-quarter 2012 earnings of 46 cents a
share, beating the Zacks Consensus Estimate by a penny and
remained in line with the prior-year quarter's earnings.
Including one-time items, loss per share came in to 85 cents
against earnings of 46 cents in the prior-year quarter.
Recently, one of the company's peers,
) posted adjusted earnings of 27 cents a share, which modestly
exceeded the Zacks Consensus Estimate by a penny.
Staples reported total sales of $6,353.1 million, down 2.0%
year over year and well below the Zacks Consensus Estimate of
$6,461.0 million. On a local currency basis, total sales dipped
1.4% in the quarter.
Gross profit for the quarter decreased 3.8% year over year to
$1,751.9 million, while gross margin contracted by approximately
50 basis points from the prior-year quarter to 27.6%. Operating
profit decreased by approximately 5.5% to $500 million, whereas
operating margin contracted 30 basis points to 7.9%. The
year-over-year decline is attributable to investments made for
implementing strategic plans along with lower product margins at
North American Delivery segment and International segment,
partially offset by lower compensation and promotional
North American Delivery
sales inched up 1% (in U.S. dollars) year over year to $2,609.0
million. The increase in revenue was driven by sales increases in
facilities and breakroom supplies and copy and print services,
partially offset by sales decrease due to the absence of two
large contract customers. Operating margin decreased 76 basis
points to 8.7%, reflecting lower product margins and heavy
investments, offset in part by lower promotional expenses.
North American Retail
sales remained flat at $2,646.6 million during the quarter
compared with the last year quarter. Comparable-store sales crept
down 1%, reflecting a 2% decline in customer traffic, which was
partly offset by a hike of 1% in average order size. Operating
margin expanded 9 basis points to 10.8%, driven by reduced
operating and distribution expenses, partially offset by
investments made for marketing the products.
plunged 12% (in U.S. dollars) year over year to $1,097.6 million,
reflecting a decrease of 6% in comparable-store sales in Europe
coupled with sluggishness in Australia. The segment reported an
operating loss during the quarter, due to deleveraging of fixed
expenses in Europe and Australia and decrease in product margins
in Europe, offset in part by reduced salary expenses in Europe
and Australia arising from job cuts.
The company maintained its guidance for fiscal 2012 and
anticipates total sales to remain at part with the prior year
level. Earnings per share are expected to rise in low
Other Financial Details
The company ended the quarter with cash and cash equivalents
of $1,020.0 million, long-term debt of $1,541.8 million and
shareholders' equity of $6,171.6 million, excluding
non-controlling interests of $7.2 million. Year-to-date, Staples
generated operating cash flows of about $895.0 million and
incurred capital expenditures of $204 million.
The company generated free cash flow of $691 million and
expects to generate more than $1 billion of free cash flow in
fiscal 2012. During the reported quarter, Staples repurchased 9.4
million shares for $111.0 million, resulting in year-to-date
repurchases of 27.4 million shares amounting to $362.0 million.
By the end of the fiscal, Staples plans to buy back shares of
worth $450.0 million.
Moreover, the company reduced a debt on bonds by paying an
amount equivalent to $325.0 million, which matured on October 1,
Currently, we prefer to maintain a long-term 'Underperform'
recommendation on the stock. However, Staples has a Zacks #3
Rank, which translates into a short-term Hold rating for the next
OFFICEMAX INC (OMX): Free Stock Analysis
STAPLES INC (SPLS): Free Stock Analysis
To read this article on Zacks.com click here.