Staples Slips To Q4 Loss On Charges, But Adj Profit Tops View

(RTTNews) - Office supplies retailer Staples, Inc. (SPLS), which agreed to acquire smaller rival Office Depot, Inc. (OPD), reported Friday a net loss for the fourth quarter compared to a profit last year, hurt by goodwill impairment and restructuring charges.

Both adjusted earnings per share from continuing operations and quarterly net sales topped analysts' expectations. The company also provided earnings forecast for the first quarter, in line with Street view.

Staples agreed on February 4 to acquire Office Depot in a cash and stock deal valued at about $11.00 per share or a total of $6.3 billion. The deal, which is expected to close by the end of calendar year 2015, will see Office Depot shareholders receiving for each share, $7.25 in cash and 0.2188 of a share in Staples stock at closing.

"During the fourth quarter we achieved strong sales growth in our North American delivery businesses, further optimized our retail store network, and improved profitability in our International business," Chairman and CEO Ron Sargent said in a statement.

The Framingham, Massachusetts-based world's largest office products company reported a net loss of $260.35 million or $0.41 per share for the fourth quarter, compared to net income of $212.38 million or $0.33 per share in the prior-year quarter.

Results for the latest quarter include $410 million of pre-tax charges for the impairment of goodwill in the company's Australia, China, and South America businesses, as well as $74 million of pre-tax restructuring and other charges.

Excluding items, adjusted income from continuing operations for the latest quarter was $197.95 million or $0.31 per share. On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.30 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total sales for the quarter grew declined 3.7 percent to $5.66 billion from $5.87 billion in the same quarter last year, but topped thirteen Wall Street analysts' consensus estimate of $5.76 billion.

Sales declined 1.0 percent in local currency, while it edged up 0.8 percent when also excluding the impact of store closures in North America in the past year. Sales growth was negatively impacted by about 4 percent due to store closures.

North American stores & online sales declined 6.9 percent to $2.70 billion, with Staples.com online sales growth of 8.0 percent. Comparable store sales, which exclude sales in Staples.com, declined 4 percent, reflecting a one percent decline in traffic and four percent drop in average order size.

North American commercial sales grew 4.9 percent to $2.06 billion, while international operations sales declined 11.1 percent or 1 percent on a local currency basis, to $898.44 million from a year ago, reflecting weak sales in European online business.

The company noted that total company gross profit as a percentage of sales improved 62 basis points.

The company said it secured more than $250 million of annualized cost savings in 2014 as part of a previously announced two-year plan to eliminate at least $500 million of annualized costs by the end of 2015.

The company noted that it closed 169 stores in North America in 2014 as part of a previously announced plan to close at least 225 stores by the end of 2015.

Looking ahead to first quarter, the company expects adjusted earnings in a range of $0.16 to $0.18 per share, on projected sales decline from the prior year. Street is currently looking for earnings of $0.17 per share on revenue decline of 2.2 percent to $5.53 billion for the quarter.

For fiscal 2015, Staples expects to generate more than $600 million of free cash flow.

"Our strategic reinvention is gaining momentum, and in 2015 we expect to benefit from the investments we've made to accelerate sales and earnings growth," Sargent added.

SPLS closed Thursday's regular trading session at $16.50, down $0.01 on a volume of 7.49 million shares.