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News Release

Staples, Inc. Reports Record Third Quarter Sales and Earnings

Company Exceeds Third Quarter 2002 Expectations With 35 Percent; Earnings Per Share Growth And A Three Percent Increase In Overall Comparable Sales

FRAMINGHAM, Mass.--(BUSINESS WIRE)--Nov. 19, 2002--Staples, Inc. (Nasdaq: SPLS) announced today the results for its third quarter ended Nov. 2, 2002. The company achieved net income of $128 million for the quarter, or $0.27 per share on a diluted basis, exceeding analyst consensus of $0.24, and a 35 percent increase over earnings per share of $0.20 reported for the third quarter of 2001.

Total company sales for the quarter grew to $3.1 billion, an increase of nine percent versus $2.8 billion reported for the same quarter of the prior year. Overall comparable sales were up three percent and retail only comparable sales increased more than one percent.

"Staples associates delivered the best third quarter in the company's history, with both sales and earnings ahead of expectations," said Ron Sargent, Staples president and CEO. "We have strong momentum from the first half of the year and a keen focus on customer service and operational excellence that is driving our record performance."

Key drivers of Staples' performance are stronger than expected top line growth, solid margin growth and continued success in improving operating margins. Staples' comprehensive profit improvement plan, called Back to Brighton, remains on track and the focal point of the company's sustained efforts to drive returns. The plan, composed of three key elements: driving profitable sales growth; improving operating margins; and enhancing asset utilization, is exceeding expectations for business improvement.

Additional highlights include:

  • North American Retail continues to build on its momentum with sequentially improving comparable sales and a 36 percent increase in business unit income for the quarter.

  • Staples' North American Delivery business continues to be the most profitable delivery business in the industry. Contract sales growth outpaces the industry and is rapidly gaining market share. It is also adding record numbers of new accounts -- 2,800 this quarter, on top of the 5,600 new contracts acquired in the first half of the year.

  • New store productivity is on the rise with sales per new store week increasing nine percent in North American Retail, up for the third straight quarter.

  • The integration of Medical Arts Press is progressing smoothly and the acquisition of the European mail order business is complete, giving the company a strategic platform to grow its delivery business in Europe.

  • Staples has now opened 68 new stores and completed 126 Dover remodels year-to-date.

"Our third quarter demonstrates more than just great earnings," added Sargent. "It's a reflection of how customers are responding to our higher service levels, and the steps we are taking to differentiate the Staples customer experience."

Based on outperforming in the third quarter, Staples expects to achieve full year earnings results $.03 higher than current analyst estimates. Staples expects to achieve earnings consistent with current analyst estimates in the fourth quarter of 2002.

About Staples

Staples, Inc. is an $11 billion retailer of office supplies, business services, furniture and technology to consumers and businesses from home-based businesses to Fortune 500 companies in the United States, Canada, the United Kingdom, France, Italy, Spain, Belgium, Germany, the Netherlands and Portugal. Headquartered outside Boston, Staples invented the office superstore concept and today is the largest operator of office superstores in the world. The company has approximately 55,000 associates serving customers through more than 1,400 office superstores, mail order catalogs, e-commerce and a contract business. More information about the company is available at

Certain information contained in this news release constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of risks and uncertainties, including but not limited to: our market is highly competitive and we may not continue to compete successfully; we may be unable to continue to successfully open new stores; our Dover format store may not be successful; our growth may continue to strain operations, which could adversely affect our business and financial results; we could encounter difficulties in integrating the new European mail order businesses and Medical Arts Press, Inc.; our quarterly operating results are subject to significant fluctuation and are impacted by the extent to which sales in new stores result in the loss of sales in existing stores, the mix of products sold, pricing actions of competitors, the level of advertising and promotional expenses and seasonality; our operating results may be impacted by changes in the economy; our stock price may fluctuate based on market expectations; our European operations may not become profitable; our International operations expose us to the unique risks inherent in foreign operations; our debt level could impact our ability to obtain future financing and continue our growth strategy; and those other factors discussed in our quarterly report on Form 10-Q for the quarter ending August 3, 2002, which is on file with the Securities and Exchange Commission, and any subsequent periodic reports filed by us with the Securities and Exchange Commission. In addition, any forward-looking statements represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

Financial tables to follow.

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

                                              November 2,  February 2,
                                                 2002         2002
Current Assets:
    Cash and cash equivalents                   $226,189     $394,824
    Merchandise inventories                    1,615,222    1,459,792
    Receivables, net                             431,866      338,581
    Deferred income taxes                         87,428      117,560
    Prepaid expenses and other current
     assets                                       93,225       92,070
         Total current assets                  2,453,930    2,402,827

Property and Equipment:
    Land and buildings                           504,274      433,569
    Leasehold improvements                       611,544      552,250
    Equipment                                    890,498      820,053
    Furniture and fixtures                       484,832      406,565
         Total property and equipment          2,491,148    2,212,437
    Less accumulated depreciation and
     amortization                              1,060,871      853,685
         Net property and equipment            1,430,277    1,358,752

Other Assets:
    Lease acquisition costs, net of
     amortization                                 52,658       54,557
    Goodwill, net of amortization              1,135,798      223,718
    Intangible assets, net of amortization       218,534            -
    Other                                         87,012       53,181
         Total other assets                    1,494,002      331,456
                                              $5,378,209   $4,093,035

Current Liabilities:
    Accounts payable                          $1,121,668     $935,442
    Accrued expenses and other current
     liabilities                                 652,908      655,274
    Debt maturing within one year                332,346        4,983
         Total current liabilities             2,106,922    1,595,699

Long-Term Debt                                   728,486      350,225
Deferred Tax Liability                             4,597        6,738
Other Long-Term Obligations                       98,021       86,199

Stockholders' Equity:
    Preferred stock, $.01 par value,
     5,000,000 shares authorized; no shares
     issued                                            -            -
    Common stock:
       Staples, Inc. Stock, $.0006 par
        value, 2,100,000,000 shares
        authorized; issued 498,103,724
        shares at November 2, 2002 and
        491,564,105 shares at
        February 2, 2002                             298          295
    Additional paid-in capital                 1,444,652    1,364,355
    Cumulative foreign currency translation
     adjustments                                  (2,388)     (27,129)
    Retained earnings                          1,554,433    1,272,991
    Less: Staples, Inc. treasury stock at
     cost, 27,724,573 shares at November 2,
     2002, and 27,569,880 shares at
     February 2, 2002                           (556,812)    (556,338)
             Total stockholders' equity        2,440,183    2,054,174
                                              $5,378,209   $4,093,035

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

                            (Unaudited)             (Unaudited)
                          13 Weeks Ended           39 Weeks Ended
                      November 2, November 3,  November 2, November 3,
                         2002        2001         2002        2001

Sales                 $3,089,725  $2,833,861   $8,260,966  $7,815,166
Cost of goods sold
 and occupancy costs   2,286,911   2,146,724    6,200,272   5,961,692
    Gross profit         802,814     687,137    2,060,694   1,853,474

Operating and other
  Operating and
   selling               471,805     431,337    1,317,421   1,238,888
  Pre-opening              2,393       3,245        6,625      12,392
  General and
   administrative        120,006      95,997      325,788     295,496
  Amortization of
   goodwill                    -       1,646            -       4,938
  Interest and other
   expense, net            5,406       6,437       10,159      23,432
    Total operating
     and other
     expenses            599,610     538,662    1,659,993   1,575,146

  Income before
   income taxes          203,204     148,475      400,701     278,328
Income tax expense        75,186      57,163      119,259     107,156
   Net income           $128,018     $91,312     $281,442    $171,172

Net income attributed
  Staples, Inc. Stock   $128,018     $91,312     $281,442     $91,312
  Staples RD Stock             -           -            -      79,740 Stock            -           -            -         120
                        $128,018     $91,312     $281,442    $171,172

Basic earnings per
 common share:
  Staples, Inc. Stock      $0.27       $0.20        $0.60       $0.20
  Staples RD Stock            $-          $-           $-       $0.18 Stock           $-          $-           $-       $0.01

Diluted earnings per
 common share:
  Staples, Inc. Stock      $0.27       $0.20        $0.60       $0.20
  Staples RD Stock            $-          $-           $-       $0.17 Stock           $-          $-           $-       $0.01

Number of shares used
 in computing basic
 earnings per common
  Staples, Inc. Stock    467,498     459,864      465,953     459,864
  Staples RD Stock             -           -            -     455,399 Stock            -           -            -       7,980

Number of shares used
 in computing diluted
 earnings per common
  Staples, Inc. Stock    471,712     465,508      472,125     465,508
  Staples RD Stock             -           -            -     461,379 Stock            -           -            -       9,819

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

                                                    39 Weeks Ended
                                               November 2, November 3,
                                                   2002        2001
Operating Activities:
 Net income                                       $281,442  $171,172
 Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation and amortization                  195,097   183,450
    Tax benefit from worthless stock deduction     (29,000)        -
    Deferred tax expense (benefit)                  34,679   (40,864)
    Other                                           24,790    15,193
    Change in assets and liabilities, net of
     companies acquired/divested using purchase
      (Increase) decrease in merchandise
       inventories                                 (96,502)   31,582
      Increase in receivables                      (13,777) (131,378)
      Decrease (increase) in prepaid expenses
       and other assets                              6,463   (12,060)
      Increase in accounts payable, accrued
       expenses and other current liabilities       94,171    53,752
      Increase in other long-term obligations        3,719     5,954
                                                   219,640   105,629
Net cash provided by operating activities          501,082   276,801

Investing Activities:
 Acquisition of property and equipment            (192,442) (258,232)
 Acquisition of businesses, net of cash
  acquired                                      (1,171,187)        -
 Proceeds from the sale of short-term
  investments                                            -     8,938
 Purchase of long-term investments                       -      (250)
 Proceeds from the sale and maturity of
  long-term investments                                  -     1,654
 Other                                                 624      (515)
Net cash used in investing activities           (1,363,005) (248,405)

Financing Activities:
 Proceeds from sale of capital stock                46,138    26,347
 Proceeds from borrowings                          730,655   597,110
 Payments on borrowings                            (85,785) (683,800)
 Repayments under accounts receivable
  securitization agreement                               -   (86,109)
 Purchase of treasury stock                           (474)  (26,071)
Net cash provided by (used in) financing
 activities                                        690,534  (172,523)

Effect of exchange rate changes on cash              2,754    (8,118)

Net decrease in cash and cash equivalents         (168,635) (152,245)
Cash and cash equivalents at beginning of
 period                                            394,824   263,560
Cash and cash equivalents at end of period        $226,189  $111,315

                    STAPLES, INC. AND SUBSIDIARIES
                           Segment Reporting
                     (Dollar Amounts in Thousands)

                             (Unaudited)             (Unaudited)
                           13 Weeks Ended          39 Weeks Ended
                       November 2, November 3, November 2, November 3,
                          2002        2001        2002        2001

Sales by Segment:
North American Retail  $1,927,445  $1,851,660  $5,110,467  $4,985,389
North American
 Delivery                 910,573     777,598   2,503,276   2,243,955
European Operations       251,707     204,603     647,223     560,642
  Total                $3,089,725  $2,833,861  $8,260,966  $7,789,986
Divested Business               -           -           -      25,180
  Consolidated Sales   $3,089,725  $2,833,861  $8,260,966  $7,815,166

Business Unit
North American Retail    $136,257    $100,464    $241,265    $179,318
North American
 Delivery                  74,714      54,710     179,593     140,055
European Operations        (2,361)       (262)     (9,998)    (16,076)
  Total business unit
   income                $208,610    $154,912    $410,860    $303,297
Divested Business               -           -           -      (1,537)
Interest and other
 expense, net              (5,406)     (6,437)    (10,159)    (23,432)
  Consolidated income
   before income taxes   $203,204    $148,475    $400,701    $278,328


Staples, Inc. (Media Contact)
Paul Capelli, 508/253-8530
Vice President, Public Relations
Staples, Inc. (Investor Contact)
Laurel Lefebvre, 508/253-4080
Director, Investor Relations