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News Release

Staples, Inc. Reports Best Year for Sales and Earnings in Company's History

FRAMINGHAM, Mass.--(BUSINESS WIRE)--March 5, 2003--

Company Reports Three Percent Increase in Retail Comparable Sales for the Quarter and 33 Percent Earnings Per Share Growth in 2002

Staples, Inc. (Nasdaq: SPLS) announced today the results for the fourth quarter and full year ended Feb. 1, 2003. The company achieved a record performance with net income excluding special items of $417 million for the full year, or $0.88 per share, on a diluted basis. Earnings per share grew 33 percent from 2001, excluding special items, or a 65 percent increase on a GAAP basis, despite a difficult business environment. Sales for the year reached $11.6 billion, an eight percent increase compared to 2001, with increasing momentum and profitability gains throughout the year.

"Staples had a phenomenal year that reflects the power of people unified behind a winning strategy," said Ron Sargent, Staples president and CEO. "The outstanding performance by Staples associates drove record results and advanced our ability to truly make buying office products easy. We now look to build on our momentum, capitalize on the investments we made this past year, and deliver sustainable results going forward."

Total company sales for the fourth quarter grew to $3.3 billion, an increase of 14 percent versus the same quarter last year. North American Retail comparable sales increased three percent, up from one percent in the third quarter, continuing the momentum seen throughout the year. Including acquisitions, sales grew 16 percent for North American Delivery and 67 percent for European operations.

Staples' net income of $165 million for the quarter, or $0.35 per share on a diluted basis, exceeded analyst expectations of $0.33. This is a 21 percent increase over earnings per share of $0.29 reported for the fourth quarter of 2001, excluding special items. On a GAAP basis, fourth quarter earnings per share grew 75 percent.

                       13 Weeks    13 Weeks    52 Weeks    52 Weeks
                         Ended       Ended       Ended       Ended
                      February 1, February 2, February 1, February 2,
                          2003        2002        2003        2002

Net income (in thousands):
Net income as
 reported (GAAP)        $164,658     $93,798    $446,100    $264,970
Special items (net of 
applicable taxes):
 Inventory writedown 
  for store closures
  (included in cost 
  of goods sold)               -       4,551           -       4,551
 Store closure charge          -      30,807           -      30,807
 Asset impairment and 
  other charges                -       6,591           -       6,591
 Tax benefit                   -           -     (29,000)          -
Net income excluding
 special items          $164,658    $135,747    $417,100    $306,919

                       13 Weeks    13 Weeks    52 Weeks    52 Weeks
                         Ended       Ended       Ended       Ended
                      February 1, February 2, February 1, February 2,
                          2003        2002        2003        2002

Diluted earnings per share:
Diluted earnings per
share as reported (GAAP):
 - Staples, Inc. Stock     $0.35       $0.20       $0.94       $0.40
 - Staples RD Stock                                             0.17
Special items (net
of applicable taxes):
 Inventory writedown 
  for store closures
  (included in cost
  of goods sold)               -        0.01           -        0.01
 Store closure charge          -        0.07           -        0.07
 Asset impairment and 
  other charges                -        0.01           -        0.01
 Tax benefit                   -           -       (0.06)          -
Diluted earnings per
 share excluding
 special items             $0.35       $0.29       $0.88       $0.66

Staples' success was fueled by outstanding operational execution, investments in productivity improvements, and excellent customer service that drove top line and margin growth. In 2002, Staples also drove significant structural shifts to attain record performance. Highlights include:

  • Shifted the customer mix by selling more to small businesses and power users and reduced reliance on less profitable casual consumers.

  • Increased the focus on selling Staples branded products to enhance customer loyalty and increase sales and margins.

  • Acquired two Delivery businesses with better margin characteristics to increase the overall margin profile of the company.

  • Developed a differentiated store format and remodeled a large percentage of stores to the new, customer-centric "Dover" model.

  • Shifted the channel mix by growing the Delivery business faster than the Retail business, with the benefits of higher margins and returns.

  • Transitioned from a primarily North American entity to a much more global presence with the acquisition of the European catalog business, giving Staples access to four new countries.

  • Shifted the Staples culture from one based on tasks and transactions to one based on customers, driven by the Back to Brighton service initiative, and a new brand promise of making it easy to buy office products at Staples.

From a Staples business unit perspective, Q4 and year-end highlights include:

North American Retail

Fourth quarter sales were $2.06 billion, up seven percent versus a year ago. Business unit income for the quarter was $173 million, up 16 percent versus last year. Staples ended the year operating 1,300 stores in North America, with the addition of 72 new stores during the year. Staples expects to open between 75 to 90 new stores in North America in 2003.

Staples' Retail business benefited from strong sales during the holiday season and through January, the start of the important "back to business" selling season, which continues into the first quarter of 2003.

North American Delivery

Consistent with its performance all year, the fourth quarter yielded outstanding results with $886 million in sales, up 16 percent versus a year ago, and leading the industry with 10 percent organic growth. Business unit income was $85 million for the quarter, an increase of 30 percent versus last year, including Medical Arts Press. Total e-commerce sales exceeded $450 million in the fourth quarter and reached $1.6 billion for the full year. The number of orders placed electronically reached 53 percent of volume in the fourth quarter, versus 45 percent a year ago.

The Contract business added 10,600 new accounts this year, 2,200 in Q4, and continues to gain share at a rapid pace. Staples Business Delivery had its strongest sales growth of the year in the fourth quarter and Quill finished the year with record performance in account acquisition and retention, while remaining the most profitable business in the Staples portfolio.


Sales for the fourth quarter of $393 million were up 67 percent versus the same quarter last year, or 46 percent in local currencies. Business unit income was $14 million for the quarter. The newly established Delivery platform is performing well, with results of the acquired business ahead of plan.

While retail comparable sales declined three percent in the fourth quarter, impacted by weak performance in Germany, store operations in the UK, Netherlands and Portugal performed well with improved sales and profitability for 2002. Staples opened three new stores in Europe in the fourth quarter and 14 for the year, for a total of 188 stores in the four countries where it operates retail stores.


For 2003, Staples anticipates 20 percent earnings per share growth for the year. The company expects to achieve mid to high single digit organic revenue growth, and two to three percent additional growth from recent acquisitions. The company expects North American Retail comparable sales to remain in the low single digits.

For the first quarter of this year, Staples expects to achieve earnings per share in the range of $0.16 to $0.17. Revenues in the first quarter are expected to increase in the range of high single to low double digits, with North American Retail comparable sales in the low single digit range.

About Staples

Staples, Inc. is an $11.6 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 58,000 associates serving customers in approximately 1,500 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 open new stores successfully; our Dover format store may not be successful; our growth may continue to strain operations, which could adversely affect our business and financial results; 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 and international conflict; our stock price may fluctuate based on market expectations; our expanding 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 November 2, 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.

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

                                               February 1, February 2,
                                                     2003        2002

Current Assets:
 Cash and cash equivalents                       $596,064    $394,824
 Merchandise inventories, net                   1,555,205   1,459,792
 Receivables, net                                 364,419     338,581
 Deferred income taxes                             96,229     117,560
 Prepaid expenses and other current assets        105,559      92,070
      Total current assets                      2,717,476   2,402,827

Property and Equipment:
 Land and buildings                               524,730     433,569
 Leasehold improvements                           621,713     552,250
 Equipment                                        951,439     820,053
 Furniture and fixtures                           472,935     406,565
      Total property and equipment              2,570,817   2,212,437
 Less accumulated depreciation and
  amortization                                  1,123,065     853,685
      Net property and equipment                1,447,752   1,358,752

 Lease Acquisition Costs, Net of Accumulated
  Amortization                                     51,450      54,557
 Intangible Assets, Net of Accumulated
  Amortization                                    216,391           -
 Goodwill                                       1,207,824     223,718
 Other Assets                                      80,495      53,181
      Total assets                             $5,721,388  $4,093,035

Current Liabilities:
 Accounts payable                              $1,092,172    $935,442
 Accrued expenses and other current
  liabilities                                     755,483     655,274
 Debt maturing within one year                    327,671       4,983
      Total current liabilities                 2,175,326   1,595,699

Long-Term Debt                                    732,041     350,225
Deferred Tax Liability                             50,267       6,738
Other Long-Term Obligations                       104,862      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 
   500,831,408 shares at February 1, 2003 
   and 491,564,105 shares at February 2, 2002         299         295
 Additional paid-in capital                     1,484,833   1,364,355
 Cumulative foreign currency translation
  adjustments                                      11,481     (27,129)
 Retained earnings                              1,719,091   1,272,991
 Less: Staples, Inc. treasury stock at cost,
  27,724,578 shares at February 1, 2003
  and 27,569,880 shares at February 2, 2002      (556,812)   (556,338)
      Total stockholders' equity                2,658,892   2,054,174
        Total liabilities and stockholders'
         equity                                $5,721,388  $4,093,035

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

                          13 Weeks Ended           52 Weeks Ended
                     February 1, February 2,  February 1,  February 2,
                           2003        2002         2003         2002

Sales                $3,335,109  $2,929,207  $11,596,075  $10,744,373
Cost of goods sold
 and occupancy costs  2,452,321   2,212,188    8,652,593    8,173,880
    Gross profit        882,788     717,019    2,943,482    2,570,493

Operating and other expenses:
 Operating and selling  478,007     412,958    1,795,428    1,651,846
 Pre-opening              2,121       1,293        8,746       13,685
 General and 
  administrative        128,713      84,009      454,501      379,505
 Amortization of
  intangibles             2,135           -        2,135            -
 Amortization of
  goodwill                    -       1,646            -        6,584
 Asset impairment and 
  other charges               -      10,717            -       10,717
 Store closure charge         -      50,092            -       50,092
 Interest and other
  expense, net           10,450       3,787       20,609       27,219
   Total operating
    and other expenses  621,426     564,502    2,281,419    2,139,648

 Income before income 
   taxes                261,362     152,517      662,063      430,845
Income tax expense       96,704      58,719      215,963      165,875
 Net income            $164,658     $93,798     $446,100     $264,970

Net income attributed to:
  Staples, Inc. Stock  $164,658     $93,798     $446,100     $185,110
  Staples RD Stock            -           -            -       79,740 Stock           -           -            -          120
                       $164,658     $93,798     $446,100     $264,970

Basic earnings per common share:
  Staples, Inc. Stock     $0.35       $0.20        $0.96        $0.40
  Staples RD Stock           $-          $-           $-        $0.18 Stock          $-          $-           $-        $0.01

Diluted earnings per common share:
  Staples, Inc. Stock     $0.35       $0.20        $0.94        $0.40
  Staples RD Stock           $-          $-           $-        $0.17 Stock          $-          $-           $-        $0.01

Number of shares used in computing
basic earnings per common share:
  Staples, Inc. Stock   469,214     460,859      466,768      460,362
  Staples RD Stock            -           -            -      455,399 Stock           -           -            -        7,980

Number of shares used in computing
diluted earnings per common share:
  Staples, Inc. Stock   474,406     467,475      472,695      466,491
  Staples RD Stock            -           -            -      461,379 Stock           -           -            -        9,819

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

                                                 Fiscal Year Ended
                                              February 1, February 2,
                                                    2003        2002

Operating Activities:
 Net income                                     $446,100    $264,970
 Adjustments to reconcile net income to net
  cash provided by operating activities:
   Depreciation and amortization                 267,209     248,965
   Asset impairment and other charges                  -      10,717
   Store closure charge                                -      50,092
   Deferred income tax expense (benefit)             226     (80,370)
   Other                                          35,767      19,278
   Change in assets and liabilities, net of
    (Increase) decrease in merchandise
     inventories                                 (15,781)    148,687
    Decrease in receivables                       62,460       1,855
    Increase in prepaid expenses and other
     assets                                       (3,574)       (684)
    Increase in accounts payable, accrued
     expenses and other current liabilities      113,026      94,438
    Increase in other long-term obligations        8,917      12,960
                                                 468,250     505,938
Net cash provided by operating activities        914,350     770,908

Investing Activities:
 Acquisition of property and equipment          (264,692)   (340,118)
 Acquisition of businesses, net of cash
  acquired                                    (1,171,187)          -
 Proceeds from sales and maturities of 
  short-term investments                               -      25,535
 Proceeds from sales and maturities of 
  long-term investments                                -       1,654
 Purchase of long-term investments                     -        (250)
 Acquisition of lease rights                        (347)     (2,568)
Net cash used in investing activities         (1,436,226)   (315,747)

Financing Activities:
 Proceeds from sale of capital stock              78,895      53,549
 Proceeds from borrowings                        730,897     522,110
 Payments on borrowings                          (95,235)   (800,194)
 (Repayments) borrowings under receivables
  securitization agreement                             -     (86,109)
 Termination of interest rate swap agreement           -      18,027
 Purchase of treasury stock                         (474)    (26,083)
Net cash provided by (used in) financing
 activities                                      714,083    (318,700)

Effect of exchange rate changes on cash            9,033      (5,197)

Net increase in cash and cash equivalents        201,240     131,264
Cash and cash equivalents at beginning of
 period                                          394,824     263,560
Cash and cash equivalents at end of period      $596,064    $394,824

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

                           (Unaudited)              (Unaudited)
                         13 Weeks Ended           52 Weeks Ended
                     February 1, February 2, February 1,  February 2,
                           2003        2002         2003         2002

Sales by Segment:
North American 
 Retail              $2,055,638  $1,928,830   $7,166,105   $6,914,219
North American
 Delivery               886,349     764,663    3,389,625    3,008,618
European Operations     393,122     235,714    1,040,345      796,356
  Total              $3,335,109  $2,929,207  $11,596,075  $10,719,193
Divested Business             -           -            -       25,180
  Consolidated sales $3,335,109  $2,929,207  $11,596,075  $10,744,373

Business Unit Income:
North American
 Retail (1)            $172,630    $142,046     $413,895     $321,364
North American
 Delivery                85,462      65,575      265,055      205,630
European Operations      13,720       9,492        3,722       (6,584)
  Total business unit
   income              $271,812    $217,113     $682,672     $520,410
Divested Businesses           -           -            -       (1,537)
Store Closure Charge          -     (50,092)           -      (50,092)
Asset Impairment and
 Other Charges                -     (10,717)           -      (10,717)
Interest and Other
 Expense, Net           (10,450)     (3,787)     (20,609)     (27,219)
  Consolidated income
   before income taxes $261,362    $152,517     $662,063     $430,845

(1) Business Unit Income for the 13 and 52 weeks ended February 2,
    2002 includes a $7.4 million charge related to the write-down of
    inventory to net realizable value for 31 stores closed in Q1 2002.

CONTACT: Staples, Inc.
Media Contact :
Paul Capelli, 508/253-8530
Investor Contact :
Laurel Lefebvre, 508/253-4080