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Staples Posts Higher Sales, Lower Profits

Framingham, Mass.
– Staples reported a 9 percent sales gain during its fiscal second quarter, but
a double-digit drop in net profits.

Sales were $5.5
billion for the quarter, ended Aug. 1, compared with second-quarter 2008 sales
of $5.1 billion, which included $673 million of Corporate Express sales for the
month of July 2008.

Net income
declined 38 percent year over year to $92 million.

“Staples generated
record cash flow as our team did an outstanding job managing expenses and
working capital during the second quarter,” said Ron Sargent, Staples’ chairman/CEO.
“We’re winning in each of our businesses by providing excellent customer service
and continuing to invest in growth initiatives.”

North American retail
operation sales for the second quarter were $2.0 billion, a decrease of 5 percent
in U.S. dollars, or 3 percent in local currency, compared with the second quarter
of 2008.

Comp-store sales
decreased 5 percent vs. the second quarter of 2008, reflecting declines in
average order size and weakness in durable categories such as business machines
and furniture, somewhat offset by growth in computers, ink and paper.

Second quarter
2009 operating income rate declined 9 basis points to 5.21 percent compared
with the second quarter of 2008, reflecting deleverage of rent and labor expense
largely offset by improvements in product margin, general and administrative and
distribution expense.

However Staples
reported it achieved all-time high customer satisfaction scores, and it opened 10
stores and closed two stores, ending the second quarter with 1,872 stores in North