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Staples sales miss Street as Europe, North America pinch

A Staples office supplies store is pictured in Burbank, California May 13, 2008. REUTERS/Fred Prouser
A Staples office supplies store is pictured in Burbank, California May 13, 2008. REUTERS/Fred Prouser

(Reuters) - Staples Inc , the largest U.S. office supply chain, reported lower-than-expected quarterly revenue and forecast weak full-year earnings as corporate customers and other shoppers in Europe and North America reduced discretionary spending.

Many investors look at office-supply retailers as a barometer of economic health because demand for their products is closely tied to white-collar employment rates.

As customers increasingly buy office supplies online or at mass merchants, these chains are fighting a battle for relevance. Analysts have called for consolidation as sales crumbled after the recent U.S. recession.

Office Depot Inc and OfficeMax Inc last month decided to combine in a $976 million all-stock deal. The deal is subject to investor and regulatory approval.

Comparable-store sales at Staples' North American stores fell 5 percent in the fourth quarter, while in Europe it decreased 9 percent, mainly due to fewer customers visiting its stores, the company said.

Staples outlined a plan last year to cut costs by closing stores, but that blueprint did not pass muster with some on Wall Street who were looking for deeper cuts in North America and Europe.

Overall, sales rose 3 percent to $6.56 billion, but missed Wall Street's average expectation of $6.72 billion, according to Thomson Reuters I/B/E/S.

The company forecast full-year adjusted earnings of $1.30-$1.35 per share, which trailed analysts' expectations of $1.43 per share.

Net income fell to $78.1 million, or 12 cents per share, in the fourth quarter ended February 2, from $283.6 million, or 41 cents per share, a year earlier.

Excluding items, the company earned 46 cents per share, topping analysts' average expectation by 1 cent.

The company also raised its quarterly dividend by 9 percent to 12 cents per share.

Staples shares closed at $13.29 on the Nasdaq on Tuesday.

(Reporting by Siddharth Cavale in Bangalore; Editing by Saumyadeb Chakrabarty)

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