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Staples’ Q4 Sales Up, Earnings Down

Framingham, Mass. — Tablets and e-readers fueled a 3 percent sales gain for Staples in the fourth quarter, although earnings fell 68 percent due to one-time charges.

Profits at the No. 1 office-supply chain totaled $90 billion for the three months, ended Feb. 2, and net sales hit $6.6 billion, although the results reflect singular events and fiscal calendar changes. Excluding one-time charges for the closure of 15 U.S. and 45 European stores, plus other items, net earnings were $308 million, an increase of 8.5 percent.

Conversely, excluding an additional reporting week in the fourth quarter, total sales fell 4 percent year over year, to $6.1 billion.

“During the fourth quarter we did a great job managing expenses in a challenging sales environment,” said Staples’ chairman/CEO Ron Sargent. “We’re making progress toward our new vision: ‘Every product your business needs to succeed.’”

As part of a strategic initiative launched last fall, the company combined its U.S. stores and online operations into a single business unit under North American retail president Demos Parneros. Sales for the new segment rose 3.1 percent in the quarter to $3.3 billion on growth in tablets and e-readers, which was partially offset by lower sales of computers, digital cameras and software. Comp-store sales sank 5 percent on a 5 percent decline in traffic and flat average order size, although sales at grew 7 percent during the quarter. Operating income also increased 7 percent, to $317 million.

Looking ahead, Staples could face stiffer long-term competition from a combined Office Depot and OfficeMax, and continued pressure from online and big-box discounters. Nevertheless, “We took important steps in 2012 to reposition the company,” Sargent said. “We successfully launched our new strategic plan and made solid progress on our reinvention. We look forward to building on our momentum throughout 2013.”

The strategic plan also includes adding more CE SKUs, introducing Apple accessories, and closing 30 North American stores and downsizing or relocating another 45 this year, the company said on an earnings call. In a research note, Janney retail analyst David Strasser said the efforts “should help Staples catch up and more effectively compete with other online/multi-channel retailers in the U.S.”

For the full year, Staples lost $161 million compared to net income of $988 million in 2011, and net sales slipped 1 percent to $24.4 billion, including one-time charges and an extra reporting week.