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Staples N.A. Segment Sales Rise 9%

Framingham, Mass. — Continued strength in its North American business drove overall growth at office products retailer Staples, with the North American retail segment jumping 9 percent in the company’s fiscal first quarter, hitting $2.2 billion, up from $2 billion in the year-ago period. North American retail comp sales rose 4 percent.

Business unit income for the North American retail segment at Staples reached $149.1 million in the first three months, ended April 30, up from $106.1 million year-on-year. This rise was driven by gross profit expansion and operating-expense management.

“We are reaping the rewards of our balanced approach to growth and profitability,” said Ron Sargent, chairman/CEO. “The continued strength of our North American businesses provides us with the flexibility to invest in the many ideas that will sustain our growth in the years to come.

Side-by-side with the North American retail segment, Staples North American delivery segment recorded a 17 percent rise in sales in the first quarter, reaching $1.2 billion from a year-earlier $1 billion. International segment sales grew 19 percent in the three months, to $549.1 million, compared with $461.9 million in the same period in 2004. However, international comp retail sales were flat in the quarter.

North American delivery segment income rose to $98.6 million in the first quarter, up from $73.1 million year-on-year, while income for the international segment in the same period dropped to $3.2 million from a year-earlier $22.7 million.

Consolidated sales for the first quarter grew by 13 percent, hitting $3.9 billion, up from $3.5 billion in the same three months during the prior year.

Consolidated operating income reached $250.8 million in the three months, up from $201.9 million, while net income hit $159.4 million, compared with $125.7 million year-over-year.

Staples operating margin improved by more than half of 1 percentage point in the first quarter, rising to 6.4 percent. This increase reflects the retailer’s “continued focus on customer service, execution and differentiation,” said Staples. Inventory turns improved by about one-third of 1 percentage point year-over-year, reaching 5.65 times.

Staples said it converted 22 Office World stores, and plans to complete 25 additional remodels by August. It said it opened eight stores in Chicago, with sales exceeding expectations.