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Staples says will close more stores this year; 3Q profit meets expectations, sales top views

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FRAMINGHAM, Massachusetts — Staples Inc. says it will close more stores than previously announced this year as it tries to reposition itself to remain competitive. The office supply retailer also delivered a solid third-quarter performance and fourth-quarter forecast on Wednesday, which sent its shares sharply higher.

The Framingham, Massachusetts-based company has been struggling for some time with a shift in consumer habits toward online shopping, along with intense competition that has hurt its sales. In response, Staples has closed stores and cut costs to improve profitability, while increasing its online offerings and other features to draw shoppers.

"We're building momentum as we reinvent Staples," Ron Sargent, Staples' chairman and CEO said.

Sargent said the company is now focused on reducing expenses further, stabilizing its underperforming businesses and investing in its best growth opportunities.

Staples said Wednesday that these moves have paid off to some degree.

It earned $216.8 million for the quarter that ended Nov.1, or 34 cents per share. That's up from $135.2 million, or 21 cents per share, in the same quarter last year. Its adjusted earnings from continuing operations totaled 37 cents per share, versus 42 cents per share last year.

The results met Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was also for earnings of 37 cents per share in the latest quarter.

Staples also said that it has closed 127 stores in North America so far this year and now expects to close about 170 stores during 2014. This is an increase from its previous guidance of 140 store closures in 2014.

The company's total revenue fell 2.5 percent to $5.96 billion, as it had fewer stores open. This topped Wall Street forecasts; analysts expected $5.94 billion, according to Zacks.

Staples said that its revenue from online sales increased 9 percent for the quarter. But its revenue from stores open at least a year fell 4 percent; this is considered a key indicator of financial performance as it strips away the impact of recently opened and closed stores.

The company expects its fourth-quarter sales to fall versus the prior year, although it did not specify by how much. It forecast earnings of 27 to 32 cents per share on an adjusted basis. Analysts polled by FactSet had forecast 31 cents per share.

Staples also disclosed in a regulatory filing that it is still investigating a data breach that it announced in October and said it may incur losses related to this. However, it said it is unable to reasonably estimate at this time what the impact might be.

The company's stock jumped 9 percent to $13.93 in afternoon trading as investors welcomed some signs of stability at the company. With Wednesday's gains, its shares are down 12 percent since the beginning of the year, while the Standard & Poor's 500 index has increased 11 percent.

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Elements of this story were generated by Automated Insights using data from Zacks Investment Research. SPLS stock research report from Zacks.

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Keywords:Staples,Earnings Report

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