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Staples Reports 39% Profit Growth

The office-products firm buys businesses in Europe and makes an investment in China.

August 18, 2004|From Associated Press

Riding strong sales across its office-products portfolio, Staples Inc. on Tuesday reported a 39% jump in fiscal second-quarter net income that topped Wall Street's forecasts.

The world's largest office-products retailer also announced its acquisition of two supply businesses in Europe -- expanding its presence to 15 countries -- and a joint-venture investment in China that marks Staples' first foray into the nation's $25-billion-a-year office-products market.

For the three months ended July 31, Staples reported net income of $122.5 million, or 24 cents a share. That compared with a profit of nearly $88 million, or 18 cents, a year earlier. Analysts surveyed by Thomson First Call expected 22 cents a share.

It was the 11th straight quarter Staples' profit has increased 20% or more.

Revenue grew 9% to $3.09 billion from $2.83 billion.

The company said North American retail sales grew 7% to $1.7 billion. Same-store sales, or sales at stores open at least a year, rose 4%, down from 6% a year earlier.

Staples is moving into the Chinese market through a minority interest investment in a Shanghai-based Internet and catalog office-products delivery business called OA365.

Staples' chief executive and president, Ronald Sargent, said the investment, while small, gives Staples an entry into the world's fastest-growing office-products market.

"It's incredibly fragmented, and it's incredibly fast-growing," Sargent said. "Over time, we'll have the opportunity to play a bigger role there."

In Europe, Staples is acquiring two businesses: Vienna-based Pressel Versand International and the office-products division of Malling Beck of Denmark. The moves will complement Staples' European catalog operations in Germany, France and Belgium.

Staples did not disclose terms of the Chinese and European deals, but Sargent said Staples' total investment in the three ventures was less than $40 million.

The company expects 20% earnings growth in the third quarter, in line with analysts' estimates.

Because its second-quarter performance beat the company's earlier expectations, Staples now expects to achieve earnings growth of about 24% for the full year. At the end of the previous quarter, Staples had forecast full-year earnings growth of more than 20%.

Staples, based in Framingham, Mass., operates nearly 1,600 stores across North America and Europe and has 60,000 employees.

Staples' shares gained 99 cents to $28.87 on Nasdaq.

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