Staples Earnings Better Than Expected, but Sales, Profits Fall

Staples Inc. (NASDAQ: SPLS) reported first-quarter 2016 results before markets opened Wednesday. The big box office supply retailer posted adjusted diluted earnings per share (EPS) of $0.17 and $5.1 billion in revenues. In the same period a year ago, Staples reported EPS of $0.17 on revenue of $5.26 billion. First-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.16 and $5.09 billion in revenue.

The company noted that GAAP earnings of $0.06 per share included a $66 million pretax charge primarily related to the company’s proposed acquisition of Office Depot and a $32 million charge related to the sale of the company’s Print Solutions Business.

CEO Ron Sargent said:

We delivered a solid first quarter and we made good progress on our critical priorities. We grew sales in key categories beyond office supplies, drove growth in our mid-market contract business, and improved customer conversion in stores and online. We plan to build on our momentum as we pursue our strategic plan to enhance long-term value.

In its outlook comments, Staples said it expects sales to decrease in the second quarter, compared with second-quarter 2015 sales. Adjusted diluted EPS is pegged in a range of $0.11 to $0.13, not including costs related to the termination of the Office Depot acquisition or costs related to closing more stores. The company plans to close about 50 North American stores in 2016 and expects to generate approximately $600 million of free cash flow, excluding any costs associated with the Office Depot acquisition.

The consensus second-quarter estimates call for EPS of $0.12 and revenues of $4.78 billion, about 2.7% below revenues in the year-ago second quarter. For the full year, analysts are looking for EPS of $0.90 and revenues of $20.49 billion.

Shares closed down about 0.7% on Tuesday at $8.28 and traded higher by about 2.3% at $8.47 in premarket trading Wednesday. The stock’s 52-week trading range is $8.04 to $16.74. Thomson Reuters had a consensus analyst price target of $10.58 before these¬†results were announced.

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