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Staples, Inc. Achieves 35% Earnings Per Share Growth in Fiscal Year 1997; Annual Sales Exceeded $5 Billion; Comparable Store and Delivery Sales Rose 10%

    Business Editors

    WESTBOROUGH, Mass.--(BUSINESS WIRE)--March 5, 1998--Staples, Inc. (NASDAQ:SPLS), today announced a 35% increase in diluted earnings per share for the fiscal year ended January 31, 1998 to $0.58 per share (before merger related charges) as compared with $0.43 per share in the prior year.
    Total sales for the fiscal year rose to $5.2 billion as compared with $4.0 billion in the prior year, a 31% increase. Comparable sales in the 606 stores and delivery hubs that have been open for more than one year increased 10% for the year.
    For the fourth quarter, the Company achieved a 33% increase in diluted earnings per share to $0.24 as compared with $0.18 in the fourth quarter of the prior year. Total sales for the fourth quarter of fiscal 1997 rose 33% to $1.550 billion from $1.164 billion. Comparable sales increased 12% for the quarter.
    During fiscal 1997, the Company's profit growth surpassed its sales growth:

    -- Operating profit increased 33%.
    -- Net income, (before merger related charges) rose 40% to $149 million as compared with $106 million in the prior year.
    -- Earnings per share (before merger related charges) increased 35% to $0.58 per share as compared with $0.43 per share in the prior year.

    Thomas G. Stemberg, Chairman and CEO commented, "We have now achieved 13 consecutive quarters of earnings per share growth in excess of 30% and led the office products superstore industry in comparable store and delivery sales growth for 14 consecutive quarters. In 1998, we anticipate opening a record 150 stores in North America and as many as 20 additional stores in Europe."
    The following are some of the achievements the Company recorded in fiscal 1997:

    -- The Company opened a record 130 stores and closed one. The Company ended the year with 582 stores in the United States, 103 stores in Canada, 40 stores in the United Kingdom and 17 stores in Germany.
    -- The Company is now the leading operator of office product superstores worldwide with 742 units in operation.
    -- A new 840,000 square foot retail distribution facility was opened in Hagerstown, MD and another 310,000 square foot facility was built in Killingly, CT.
    -- Staples' Contract and Commercial business unit surpassed the $1 billion annual sales mark.
    -- The Company acquired its joint venture partners' interest in the European stores and assumed majority control of these operations.

    During the year, the Company terminated its agreement to merge with Office Depot. Net of charges associated with the terminated merger, the Company reported a 23% increase in net income to $131 million as compared with $106 million in the prior year and a 19% increase in earnings per share to $0.51 per share as compared with $0.43 per share in the prior year.
    For the fourth quarter of the fiscal year, the Company achieved the following results:

    -- Operating profit increased 36%.
    -- Net income increased 37% to $64.3 million from $46.9 million in the prior year period.
    -- Earnings per share rose 33% to $0.24 versus $0.18 in the prior year period.

    Staples, Inc. is a $5 billion retailer of office supplies, furniture and technology to businesses from home-based businesses to Fortune 50 companies in the United States, Canada, the United Kingdom and Germany. Staples, headquartered outside Boston, MA, invented the office superstore concept and today is the largest operator of office superstores in the world. The Company, which has grown earnings per share at a 40% compounded rate over the last five years, has 30,000 employees serving the business customer through 742 office superstores, mail order catalogs and a contract business.
    More information may be obtained from the Company's Investor Relations department by dialing (800) INV-SPL1 or from the Company's website at http://www.staples.com.
    Certain information presented within this press 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 the Company's most recent filings on Forms 10-K and 10-Q with the Securities and Exchange Commission.

(Tables follow)


                      Staples Inc. and Subsidiaries
                    Consolidated Statements of Income
             (Dollar Amounts in Thousands, Except Share Data)

                                          13 Weeks Ended
                                January 31,             February 1,
                                   1998                    1997
                              $           %           $           %


Sales                     $1,549,950   100.00%    $1,163,989   100.00%
Cost of goods sold and
 occupancy costs           1,171,176    75.56%       876,689    75.32%
  Gross profit               378,774    24.44%       287,300    24.68%

Operating expenses:
 Operating and selling       212,167    13.69%       164,217    14.11%
 Pre-opening                   1,492     0.10%           509     0.04%
 General and administrative   53,514     3.45%        40,644     3.49%
 Amortization of goodwill        952     0.06%           578     0.05%
  Total operating expenses   268,125    17.30%       205,948    17.69%

  Operating income           110,649     7.14%        81,352     6.99% 

Other income (expense):
 Interest and other   
  expense, net                (6,151)   (0.40%)       (5,310)  (0.46%)
  Total other income 
   (expense)                  (6,151)   (0.40%)       (5,310)  (0.46%)

  Income before equity in 
   loss of affiliates and 
   income taxes              104,498     6.74%        76,042     6.53%
Equity in gain/(loss) of       
 affiliates                                              189     0.02% 

  Income before income 
   taxes                     104,498     6.74%        76,231     6.55%
Income tax expense            40,232     2.60%        29,349     2.52%
  Net income before 
   minority interest          64,266     4.15%        46,882     4.03% 
 Minority interest                14
  Net income                 $64,280     4.15%       $46,882     4.03%

Earnings per common share
Net income per common share    $0.26                   $0.19

Earnings per common share--
 assuming dilution
Net income per common share    $0.24                   $0.18

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                      Staples Inc. and Subsidiaries
                    Consolidated Statements of Income
             (Dollar amounts in thousands, except share data)

                                           52 Weeks Ended
                                    Jan. 31,                 Feb.1,   
                                      1998                    1997
                                $            %            $          %


Sales                     $5,181,035   100.00%    $3,967,665   100.00%
Cost of goods sold and
 occupancy costs           3,934,172    75.93%     3,023,279    76.20%
Gross profit               1,246,863    24.07%       944,386    23.80%

Operating expenses:
 Operating and selling       779,789    15.05%       594,978    15.00%
 Pre-opening                   9,443     0.18%         8,299     0.21%
 General and administrative  182,590     3.52%       134,817     3.40%
 Amortization of goodwill      3,581     0.07%         2,291     0.06%
  Total operating expenses   975,403    18.83%       740,385    18.66%

Operating income             271,460     5.24%       204,001     5.14%

Other income (expense):
 Interest and other
  expense, net               (23,053)   (0.44%)      (19,887)  (0.50%)
 Merger-related costs        (29,665)   (0.57%)                      
 Total other income 
 (expense)                   (52,718)   (1.02%)      (19,887)  (0.50%)

Income before equity in loss
 of affiliates and income
 taxes                       218,742     4.22%       184,114     4.64%
Equity in gain/(loss) of 
 affiliates                   (5,953)   (0.11%)      (11,073)   (0.28%)

Income before income taxes   212,789     4.11%       173,041     4.36%
Income tax expense            81,924     1.58%        66,621     1.68%
Net income before minority
 interest                    130,865     2.53%       106,420     2.68%
Minority interest                 84    

Net income                  $130,949     2.53%      $106,420     2.68% 

Earnings per common share
Net income per common share    $0.53                   $0.44

Earnings per common share--
assuming dilution
Net income per common share    $0.51                   $0.43

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                    Staples, Inc. and Subsidiaries
                     Consolidated Balance Sheets
          (Dollars Amounts in Thousands, Except Share Data)

                                        January 31,       February 1,
                                          1998               1997

ASSETS
Current Assets:                                               
 Cash and cash equivalents                $ 355,238       $ 98,143
 Short-term investments                       2,666          7,986
 Merchandise inventories                  1,092,410        813,661
 Receivables, net                           151,885        167,072
 Deferred income taxes                       33,108         31,202
 Prepaid expenses and other
  current assets                             31,026         33,284
   Total current assets                   1,666,333      1,151,348

Property and Equipment:
 Land and buildings                         117,858         73,070
 Leasehold improvements                     288,213        231,604
 Equipment                                  257,116        197,258
 Furniture and fixtures                     168,411        111,967
   Total property and
    equipment                               831,598        613,899
 Less accumulated depreciation
  and amortization                          257,627        171,042
 Net property and equipment                 573,971        442,857

Other Assets:
 Lease acquisition costs,
  net of amortization                        43,244         42,552
 Investment in affiliates                                   40,542
 Goodwill, net of amortization              139,753         81,306
 Deferred income taxes                       15,451         16,708
 Other                                       15,758         12,439
   Total other assets                       214,206        193,547
                                        $ 2,454,510    $ 1,787,752

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
 Accounts payable                       $   641,851    $   421,051
 Accrued expenses and other
  current liabilities                       259,290        174,284
 Debt maturing within one
  year                                       39,779          7,220
   Total current liabilities                940,920        602,555

Long-Term Debt                              208,876         91,342
Other Long-Term Obligations                  37,103         32,169
Convertible Debentures                      300,000        300,000
Stockholders' Equity:
 Preferred stock, $.01 par 
  value-authorized
  5,000,000 shares; no
  shares issued
  Common stock, $.0006 par
  value-authorized
  500,000,000 shares; issued
  252,169,891 shares
  at January 31, 1998 and
  243,416,063 shares at
  February 1, 1997                              106             98
 Additional paid-in capital                 593,895        508,868
 Cumulative foreign currency
  translation adjustments                   (10,315)          (128)
 Unrealized gain on short
  term investments                                4             11
 Retained earnings                          384,132        253,183
 Less: 59,149 shares of treasury
  stock, at cost                               (346)          (346)
 Minority interest                              135
   Total stockholders' equity               967,611        761,686
                                        $ 2,454,510    $ 1,787,752

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

                                           Fiscal Year Ended
                                      Jan. 31,    Feb. 1,    Feb. 3,
                                       1998        1997       1996
Operating Activities:
 Net income                         $130,949     $106,420    $73,705
 Adjustments to reconcile net
  income to net cash provided
  by (used in) operating 
  activities:                     
   Minority interest                     (84)                      
   Depreciation and amortization      83,380       55,948     43,551
   Expense from 401K and PARS   
    stock contribution                10,409        2,715      1,633
   Equity in loss of affiliates        5,953       11,073     12,153
   Deferred income taxes benefit/
    (expense)                          3,877        3,137    (13,211)
   Change in assets and liabilities,
    net of effects of purchase of
    other companies:
     Increase in merchandise
      inventories                   (227,037)    (167,479)  (177,509)
    (Increase) decrease in 
      receivables                     24,441      (44,523)   (42,129)
    (Increase) decrease in prepaid
      expenses and other assets       (5,059)      (4,349)    (1,570)
     Increase in accounts payable,
      accrued expenses and other
      current liabilities            320,527      179,108     57,999
     Increase in other long-term
      obligations                      5,544        5,883      2,094

 Net cash provided by (used in)     
  operating activities               221,951       41,513   (113,849)
                                   
                                     352,900      147,933    (40,144)

Investing Activities:
 Acquisition of property and 
  equipment                         (183,133)    (199,614)  (116,295)
 Acquisition of businesses,
  net of cash acquired               (79,325)                       
 Proceeds from sales and
  maturities of short-term
  investments                          9,655        8,800     16,519
 Purchase of short-term investments   (4,500)      (4,600)          
 Investment in affiliates             (3,788)     (18,629)   (22,088)
 Acquisition of lease rights          (2,717)      (5,534)    (2,044)
 Other                               (12,128)       2,669      1,281

 Net cash used in investing 
  activities                        (275,936)    (216,908)  (122,627)

Financing Activities:
 Proceeds from sale of capital 
  stock                               48,045       21,773     16,964
 Proceeds from convertible
  debentures, net of deferred
  costs                                                      291,032
 Proceeds from borrowings            963,263    1,171,025  1,224,883
 Payments on borrowings             (828,457)  (1,124,453)(1,313,930)
 Net cash provided by financing
  activities                         182,851       68,345    218,949

 Effect of exchange rate changes 
  on cash                             (2,720)         643        142

Net increase in cash and cash
 equivalents                         257,095           13     56,320
Cash and cash equivalents at 
 beginning of period                  98,143       98,130     41,810
    
Cash and cash equivalents at     
 end of period                      $355,238      $98,143    $98,130 
           
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   --30--es/bos* mp/bos gk/bos cd/bos sb/bos mb/bos

   CONTACT: Media Contact:
             Staples, Inc.
            Jean Papagni, (508) 370-8468
            jean.papagni@staples.com
              OR
             Investor Contact:
             Staples, Inc.
            Samuel J. Levenson, CPA, (508) 370-7963
            sam.levenson@staples.com

   KEYWORD: MASSACHUSETTS 
   INDUSTRY KEYWORD: RETAIL EARNINGS