) the global leader in the supply of office products, recently
posted first-quarter 2012 results. The quarterly earnings of 30
cents a share came in line with the Zacks Consensus Estimate and
increased 7.1% from 28 cents earned in the prior-year quarter.
Including one-time items, earnings decreased 3.6% year over year to
Staples reported total sales of $6,104.8 million, down 1.1% year
over year and below the Zacks Consensus Estimate of $6,187
Gross profit for the quarter inched down 1.6% to $1,609.7
million, while gross margin contracted 10 basis points to 26.4%.
Operating profit decreased 8.7% to $318.1 million, whereas
operating margin contracted 43 basis points to 5.2%. The company
stated that costs related to headcount reductions and deleveraging
of fixed expenses in International operations took a toll on
North American Delivery
sales inched up 2% year over year to $2,555.1 million. The revenue
increase reflected strong sales in facilities and breakroom
supplies coupled healthy growth in the sales of copy and print and
promotional products. Operating margin increased 3 basis points to
7.9%, reflecting supply chain effectiveness, offset by decrease in
North American Retail
sales remained approximately flat at $2,323.8 million.
Comparable-store sales also remained flat in the quarter,
reflecting no change in the average order size and customer
traffic. Operating margin decreased 43 basis points to 7.2%.
During the quarter, the company opened 3 stores and closed 6 in
the U.S. Further, Staples opened one store in Canada and closed
one, ending the quarter with 1,914 stores in North America.
contracted 8% (in U.S. dollars) year over year to $1,225.9 million,
reflecting a decrease of 6% in comparable store sales in Europe
coupled with sluggishness in Australia. Operating margin decreased
225 basis points to 1.5%, reflecting increased costs related to
headcount reductions and deleveraging of fixed expenses.
During the quarter, the company opened one store and closed 3,
bringing the total number of international stores to 376.
Other Financial Details
The company ended the year with cash and cash equivalents of
$1,204.5 million, long-term debt of $1,595.9 million and
shareholders' equity of $7,088.1 million, excluding non-controlling
interests of $7.1 million. During the quarter, Staples generated
free cash flow of $94.8 million, whereas incurred capital
expenditures of $52 million.
During the reported quarter, Staples repurchased 5.9 million
shares for $93 million and distributed $75 million through cash
Management stood by its earlier forecast and expects sales to
increase in the low single-digits in fiscal 2012, while the bottom
line is expected to increase in the high single digits. The company
expects to generate more than $1 billion of free cash flow in
Currently, we prefer to maintain a long-term Neutral rating on
the stock. Moreover, Staples which competes with
Office Depot Inc
), has a Zacks #2 Rank, which translates into a short-term Buy
OFFICE DEPOT (ODP): Free Stock Analysis Report
OFFICEMAX INC (OMX): Free Stock Analysis Report
STAPLES INC (SPLS): Free Stock Analysis Report
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