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News Release

Staples Inc. Reports 24 Percent Increase in First Quarter Revenue
..Net Income Jumps 47 Percent; Earnings Per Share Increase 38 Percent...

FRAMINGHAM, Mass.--(BUSINESS WIRE)--May 18, 1999-- ..Same-Store Sales Grow 10 Percent for North America, 9 Percent


Staples Inc. (NASDAQ:SPLS - news), the pioneer of the office superstore industry, today announced net income of $50.3 million, or $.11 per common share on a diluted basis, for the first quarter which ended May 1, 1999, compared with $34.1 million, or $.08 per common share, on a diluted basis, for the prior year.

Historical data has been restated to reflect the merger with Quill Corporation under the pooling of interests method of accounting.

Total sales for the quarter rose 24 percent to $2.1 billion from $1.7 billion reported for the same period last year. Comparable sales in the 763 stores that have been open for more than one year and delivery hubs, increased 9 percent for the first quarter company-wide, and increased 10 percent for the first quarter in North America.

''We delivered another quarter of outstanding financial performance with double-digit same-store sales growth in our North American superstores business,'' said Staples Chairman and Chief Executive Officer Thomas G. Stemberg. ''With the launch of the Quill brand in Europe, aggressive store opening plans and continued investments in e-commerce and service opportunities, we are preparing for future growth opportunities while achieving best-in-class results.''

In separate press releases issued today, Staples announced two strategic Internet partnerships and investments formed to spearhead the company's position as a leader in the e-commerce arena. Staples invested $7 million in, one of the largest single domain name registration services on the Internet. The company also invested $3.5 million in, formerly known as Nth Dimension Corporation, the leading web retailer of wireless phones, service plans and acceseries. Both agreements include extensive marketing initiatives that will drive sales across nearly all Staples sales channels, including its e-commerce, retail stores and catalog operations.

''These partnerships are designed to make the one-stop e-commerce shop for small businesses,'' said Stemberg. ''Internet applications have tremendous potential across all of our businesses and will help us improve customer service while driving down our costs of doing business. By teaming with leaders in this space, we're able to add incredible value to our Web site.''


In addition, this quarter Staples:

--   Opened 47 new retail stores, ending the quarter with 960 stores
     worldwide; 752 stores in the United States, 132 stores in Canada,
     51 stores in the United Kingdom, and 25 stores in Germany;

--   Continued to strengthen its e-commerce efforts through strategic
     marketing agreements with GeoCities and;

--   Launched its Quill catalog business in the United Kingdom;

--   Expanded store hours with the emergence of the first 24-hour
     office superstores;

--   Enhanced service offerings through a partnership with Sprint
     telecommunications services;

--   Launched an aggressive store opening plan for the Atlanta market;

--   Broke ground for its fourth major retail distribution center in
     Terre Haute, Ind; and

--   Added Margaret C. Whitman, the president and chief executive
     officer of eBay, to its Board of Directors.

About Staples

Staples Inc. is a $7 billion retailer of office supplies, furniture and technology to consumers and businesses from home-based businesses to Fortune 50 companies in the United States, Canada, the United Kingdom and Germany. Headquartered outside Boston, Staples invented the office superstore concept and today is the largest operator of office superstores in the world. The company has over 44,000 employees serving customers through more than 960 office superstores, mail order catalogs, e-commerce and a contract business. More information about the company is available at

Certain information presented within this news release may constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, which are discussed in our most recent 10-K on file with the Securities and Exchange Commission.


                    STAPLES, INC. AND SUBSIDIARIES
                   Consolidated Statements of Income
           (Dollar Amounts in Thousands, Except Share Data)

                                                13 Weeks Ended
                                              May 1,         May 2,
                                               1999           1998

Sales                                     $  2,072,066   $  1,670,611
Cost of goods sold and occupancy costs       1,577,313      1,289,833
    Gross profit                               494,753        380,778

Operating and other expenses:
  Operating and selling                        315,320        248,411
  Pre-opening                                    4,508          3,352
  General and administrative                    88,740         67,486
  Amortization of goodwill                       2,287            924
  Interest and other expense, net                1,416          4,694
    Total operating and other expenses         412,271        324,867

   Income before income taxes                   82,482         55,911
Income tax expense                              32,168         20,011
    Net income before minority interest         50,314         35,900
  Minority interest                               --               50
    Net income                            $     50,314   $     35,950

Basic earnings per common share
    Historical net income per
     common share                         $       0.11   $       0.09

Diluted earnings per common share
    Historical net income per
     common share                         $       0.11   $       0.08

Pro forma:
   Historical net income                  $     50,314   $     35,950
   Provision for income taxes on
         previously untaxed earnings of
         pooled S-Corporation income              --            1,814
    Pro forma net income                  $     50,314   $     34,136

Basic earnings per common share
    Pro forma net income per
     common share                         $       0.11   $       0.08

Diluted earnings per common share
    Pro forma net income per
     common share                         $       0.11   $       0.08

Number of shares used in computing
 historical and pro forma basic net
 income per common share                   462,832,475    419,027,328

Number of shares used in computing
 historical and pro forma diluted net
 income per common share                   476,801,013    461,616,368

                    STAPLES, INC. AND SUBSIDIARIES
                      Consolidated Balance Sheets
           (Dollar Amounts in Thousands, Except Share Data)

                                              May 1,
                                               1999        January 30,
                                             (Unaudited)      1999

Current Assets:
  Cash and cash equivalents                 $   151,670   $   357,993
  Short-term investments                         23,498        17,428
  Merchandise inventories                     1,305,170     1,340,432
  Receivables, net                              342,675       221,836
  Deferred income taxes                          77,221        75,261
  Prepaid expenses and other current assets      37,855        51,150
    Total current assets                      1,938,089     2,064,100

Property and Equipment:
  Land and buildings                            239,336       231,378
  Leasehold improvements                        387,839       372,451
  Equipment                                     438,210       400,225
  Furniture and fixtures                        254,073       239,755
    Total property and equipment              1,319,458     1,243,809
  Less accumulated depreciation
   and amortization                             435,352       403,520
    Net property and equipment                  884,106       840,289

Other Assets:
  Lease acquisition costs, net of
   amortization                                  73,017        75,127
  Goodwill, net of amortization                 300,981       148,201
  Deferred income taxes                          29,704        28,735
  Other                                          22,350        22,814
    Total other assets                          426,052       274,877
                                            $ 3,248,247   $ 3,179,266

Current Liabilities:
  Accounts payable                          $   778,251   $   794,427
  Accrued expenses and other current
   liabilities                                  471,454       438,311
  Debt maturing within one year                  35,782        32,594
    Total current liabilities                 1,285,487     1,265,332

Long-Term Debt                                  204,270       205,015
Other Long-Term Obligations                      53,913        52,033
Stockholders' Equity:
  Preferred stock, $.01 par
  5,000,000 shares; no shares issued               --            --
  Common stock, $.0006 par
  1,000,000,000 shares; issued
  463,163,798 at May 2, 1999 and
  461,538,061 shares at January 30, 1999            279           277
  Additional paid-in capital                  1,065,137     1,043,194
  Cumulative foreign currency
   translation adjustments                       (8,513)      (11,675)
  Unrealized gain on investments                      1             7
  Retained earnings                             683,635       633,321
  Less: treasury stock at cost,
   1,344,768 shares at
   May 1, 1999 and 488,922 shares
   at January 30, 1999                          (35,962)       (8,238)
        Total stockholders' equity            1,704,577     1,656,886
                                            $ 3,248,247   $ 3,179,266

                    STAPLES, INC. AND SUBSIDIARIES
                 Consolidated Statements of Cash Flows
                     (Dollar Amounts in Thousands)

                                                   13 Weeks Ended
                                                 May 1,        May 2,
                                                 1999          1998
Operating Activities:
  Net income                                  $  50,314    $  35,950
  Adjustments to reconcile net
   income to net cash
   used in operating activities:
   Minority interest                               --            (50)
   Depreciation and amortization                 34,456       28,652
   Expense from 401K and PARS
    stock contribution                            4,625        1,622
   Deferred income taxes (benefit)/expense       (2,800)       2,795
   Change in assets and liabilities,
    net of companies acquired
    using purchase accounting:
   (Decrease)/Increase in
     merchandise inventories                     47,238       (3,704)
   Increase in receivables                     (100,995)     (37,841)
   (Decrease)/Increase in prepaid
     expenses and other assets                   11,278       (8,167)
   Decrease in accounts payable, accrued
      expenses and other current
       liabilities                              (41,760)     (50,787)
   Increase in other long-term obligations          526        6,009
                                                (47,432)     (61,471)
  Net cash provided by/(used in)
   operating activities                           2,882     (25,521)

Investing Activities:
  Acquisition of property and equipment         (60,623)     (50,925)
  Acquisition of businesses,
   net of cash acquired                        (137,625)        --
  Proceeds from sales and maturities
   of short-term investments                     10,572       11,389
  Purchase of short-term investments            (16,651)      (6,854)
  Proceeds from sales and maturities
   of long-term investments                        --          3,430
  Purchase of long-term investments                --         (2,545)
  Acquisition of lease rights                       656      (36,826)
  Other                                           2,553       (5,596)
  Net cash used in investing activities        (201,118)     (87,927)

Financing Activities:
  Proceeds from sale of capital stock             9,973       13,467
  Proceeds from borrowings                       13,150         (334)
  Payments on borrowings                        (11,914)     (24,575)
  Purchase of treasury stock                    (19,779)        --
  Net cash used in financing activities          (8,570)     (11,442)

  Effect of exchange rate changes on cash           483          454

Net decrease in cash and cash equivalents      (206,323)    (124,436)
Cash and cash equivalents at
 beginning of period                            357,993      381,088
Cash and cash equivalents at end of period    $ 151,670    $ 256,652

Click to download 5/18/99 financial tables in Excel format.

     Staples Inc.
     Shannon Lapierre
     Manager, Public Relations
     Diane Basile
     Director, Investor Relations