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Staples Q1 Sales Up, Profits Down

Framingham, Mass. — Office-supply leader Staples said net sales rose 19 percent to $5.8 billion during its fiscal first quarter on strength in its North American delivery business, while net income declined 33 percent to $143 million.

Within the company’s North American retail division, income fell 4.6 percent to $160.5 million and sales declined 9 percent to $2.2 billion for the three months, ended May 2. Same-store sales slipped 8 percent, attributable to smaller average order size and weakness in business machines, office furniture and other durable categories, Staples said.

However, traffic declines slowed, customer-satisfaction scores reached an all-time high, and the operating income rate rose 35 basis points to 7.3 percent during the quarter, reflecting higher product margins and reduced marketing expenses, the chain said. Staples also opened 31 stores and closed two during the quarter, bringing the North American store count to 1,864 locations.

“Staples associates drove solid earnings performance in a very tough sales environment,” chairman/CEO Ron Sargent said in a statement. “These results reflect our commitment to take great care of customers, tightly manage expenses and invest for future growth.”

Analysts largely agreed. “The company is holding its own in a tough environment, showing well at retail,” said Goldman Sachs managing director Matt Fassler in a research note. “Retail same-store sales … marked a nice improvement vs. -13 percent in 4Q 2008.  Retail profits sharply beat our forecast, declining just slightly despite the big same-store sales hit, on better product margin and cost control, reflecting an aggressive effort to redefine ‘variable’ costs.”