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News Release

Staples Inc. Announces Fourth Quarter and Fiscal Year 2000 Results

FRAMINGHAM, Mass.--(BUSINESS WIRE)--March 6, 2001--Staples, Inc. (NASDAQ:SPLS) today reported sales of $3.1 billion for the fourth quarter ended February 3, an 18 percent increase over the $2.6 billion reported for the same period last year. Comparable sales grew 3 percent overall and were flat for the retail business. Net income for the quarter, excluding one-time items, was $94 million, or $.21 per diluted share, compared to $119 million, or $.26 per diluted share, for the same period in the prior year.

In the fourth quarter, the company recorded a previously announced $206 million charge related to the write-down of its investments in Staples Communications and a number of Internet companies. In addition, sales comparisons include the benefit from the 53-week year in fiscal year 2000.

"The fourth quarter and the year clearly challenged us," said Staples Chairman and Chief Executive Officer Thomas G. Stemberg. "The continued deterioration of the economy during the back half of the year, coupled with our own aggressive growth initiatives, hampered our performance. For 2001, we're employing a more conservative approach to growth, with a stronger focus on fewer initiatives."

FY 2000 Results

For the year, sales grew 19 percent to $10.7 billion from the $8.9 billion reported for fiscal year 1999. Comparable sales increased 7 percent overall and 4 percent for the retail business. Net income for the year, excluding one-time items, was $261 million, or $.58 per diluted share, compared with $315 million, or $.67 per diluted share, for the prior year.

2000 Accomplishments

During fiscal year 2000, Staples reached a number of milestones.

  • Staples.com revenue grew more than five-fold. The company solidified its position as the leading office supply site for small businesses, ranking #1 in MediaMetrix's work and combined work/home categories for 11 consecutive months.

  • Internet touch points were integrated in all Staples U.S. stores, adding a virtual inventory of more than 100,000 products and serving as an invaluable sales tool for associates.

  • The company's European retail business turned profitable for the first time, setting the stage for more significant, profitable growth in the coming years.

  • Quill's direct marketing business continued to grow at a double-digit pace, with operating profit at its highest level ever.

  • Major advancements were made in the company's supply chain, with new systems and tools in place to increase efficiencies and sales effectiveness. Inventory turns improved by 21 basis points for the year.

Outlook

Commenting on the outlook for 2001, Stemberg said, "We see tremendous opportunities for Staples to reap the rewards of the many growth investments it has made over the past few years. Our Internet business is on track to turn profitable in the fourth quarter of 2001 and our European business is positioned for a strong year. In North America, we have curtailed our store growth from 17 percent in 2000 to 12 percent in 2001, as we benefit from our aggressive real estate program of the last two years. We will also make use of remodels and reflows to better merchandise existing stores."

"We don't expect to see significant improvements in the economy until the second half of the year and, as a result, we expect to earn $.09 per share for the first quarter of 2001. Our longer-term guidance is for earnings growth of 20 percent to 25 percent and comparable sales in the mid-single-digit range," added Stemberg.

About Staples

Staples Inc. is an $11 billion retailer of office supplies, furniture and technology to consumers and businesses from home-based businesses to Fortune 500 companies in the United States, Canada, the United Kingdom, 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 over 50,000 employees serving customers through more than 1,300 office superstores, mail order catalogs, e-commerce and a contract business. More information about the company is available at http://www.staples.com.

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 various important factors including risks related to Staples' ability to compete in its highly competitive market, Staples' ability to continue to successfully open new stores, Staples' quarterly operating results being subject to significant fluctuation, Staples' stock price fluctuating based on the expectations of professional securities analysts, the strain on operations due to Staples' rapid growth which can affect operating results, the ability of Staples' foreign operations and Staples.com to become profitable and the ability of Staples to obtain adequate future financing. Additional information concerning these factors is contained in Staples' Quarterly Report on Form 10-Q dated December 11, 2000, which is on file with the Securities and Exchange Commission.

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

                      14 Weeks     13 Weeks
                        Ended        Ended        Fiscal Year Ended
                      February 3,  January 29, February 3, January 29,
                         2001         2000        2001        2000

Sales                $3,114,819  $2,630,822   $10,673,671  $8,936,809
Cost of goods
 sold and
 occupancy costs      2,370,908   1,959,135     8,097,166   6,721,563
  Gross profit          743,911     671,687     2,576,505   2,215,246

Operating expenses:
  Operating and
   selling              455,354     371,181     1,643,162   1,299,212
  Pre-opening             2,705       2,508        22,297      16,485
  General and
   administrative       110,142      92,023       409,575     354,060
  Amortization
   of goodwill            2,912       3,696        13,628      12,014
  Store closure
   credit                  --          --          (7,250)       --
  Asset impairment
   and other charges    205,750        --         205,750        --
  Interest and other
   expense, net          13,349       6,547        45,158      17,101
    Total operating
     and other
     expenses           790,212     475,955     2,332,320   1,698,872

   Income/(loss)
    before
    income taxes        (46,301)    195,732       244,185     516,374
Income tax expense       65,374      76,335       184,473     201,386

   Net income/(loss) $ (111,675) $  119,397   $    59,712  $  314,988

Net income (loss)
 attributed to:
  Staples, Inc.
   Stock             $      -    $      -     $       -    $  195,591
  Staples RD
   Stock               (106,422)    120,127        71,197     120,127
  Staples.com
   Stock                 (5,253)       (730)      (11,485)       (730)
                     ----------  ----------   -----------  ----------
                     $ (111,675) $  119,397   $    59,712  $  314,988

Basic earnings per
  common share:
 Net income per
  common share -
  Staples, Inc.
  Stock                                                    $     0.42
 Net income/(loss)
  per common share -
  Staples RD Stock   $    (0.23) $      0.26  $      0.16  $     0.26
 Net loss per
 common share -
 Staples.com Stock   $    (0.41) $    (0.09)  $     (0.84) $    (0.09)

Diluted earnings per
 common share:
 Net income per
  common share -
  Staples, Inc.
  Stock                                                    $     0.41
 Net income/(loss)
  per common share -
  Staples RD Stock   $    (0.23) $     0.26   $      0.15  $     0.26
 Net loss per
  common share -
  Staples.com Stock  $    (0.41) $    (0.09)  $     (0.84) $    (0.09)

Number of shares used
 in computing basic net
 income/(loss) per
 common share
  Staples, Inc. Stock                                         461,934
  Staples RD Stock      453,128     455,991       454,490     455,991
  Staples.com Stock      12,946       8,054        13,665       8,054

Number of shares used
 in computing diluted
 net income/(loss)
 per common share
  Staples, Inc. Stock                                         475,059
  Staples RD Stock      453,128     467,068       460,791     467,068
  Staples.com Stock      12,946       8,054        13,665       8,054




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


                                             February 3,   January 29,
                                                 2001         2000
ASSETS
Current Assets:
Cash and cash equivalents                   $   263,560   $   110,483
Merchandise inventories                       1,639,698     1,607,516
Receivables, net                                297,916       360,901
Deferred income taxes                            43,955        39,730
Prepaid expenses and other current assets       110,982        74,821
  Total current assets                        2,356,111     2,193,451

Property and Equipment:
  Land and buildings                            400,971       328,994
  Leasehold improvements                        519,681       442,119
  Equipment                                     692,783       547,309
  Furniture and fixtures                        352,712       286,260
    Total property and equipment              1,966,147     1,604,682
  Less accumulated depreciation
   and amortization                             665,622       509,920
    Net property and equipment                1,300,525     1,094,762

Other Assets:
  Lease acquisition costs, net of
   amortization                                  58,596        68,832
  Goodwill, net of amortization                 238,536       387,595
  Deferred income taxes                           5,490        34,912
  Other                                          30,155        66,524
    Total other assets                          332,777       557,863
                                            -----------   -----------
                                            $ 3,989,413   $ 3,846,076

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                          $   983,851   $   897,523
  Accrued expenses and other current
   liabilities                                  542,923       545,162
  Debt maturing within one year                 184,505        12,219
    Total current liabilities                 1,711,279     1,454,904

Long-Term Debt                                  441,257       500,903
Other Long-Term Obligations                      73,047        61,456
Stockholders' Equity:
  Preferred stock, $.01 par value-authorized
   5,000,000 shares; no shares issued              --            --
  Common stock:
   Staples RD Stock, $.0006 par
    value-authorized 1,500,000,000 shares;
    issued 477,111,602 shares at February 3,
    2001 and 470,752,253 shares at
    January 29, 2000                                285           282
   Staples.com Stock, $.0006 par
    value-authorized 600,000,000 shares;
    issued 14,105,821 shares at February 3,
    2001 and 13,626,093 at January 29, 2000           8             8
  Additional paid-in capital                  1,285,719     1,196,512
  Cumulative foreign currency translation
   adjustments                                       53        (4,473)
  Unrealized (loss)/gain on investments              (1)        6,651
  Retained earnings                           1,008,021       948,309
  Less: Staples RD treasury stock at cost,
   22,787,300 shares at February 3, 2001
   and 13,668,743 shares at January 29, 2000   (505,001)     (318,476)
  Less: Staples.com treasury stock at cost,
   4,449,773 shares at February 3, 2001
   and 0 shares at January 29, 2000             (25,254)         --
        Total stockholders' equity            1,763,830     1,828,813
                                            -----------   -----------
                                            $ 3,989,413   $ 3,846,076



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

                                                 Fiscal Year Ended
                                             February 3,   January 29,
                                                 2001         2000
Operating Activities:
 Net income                                 $    59,712  $   314,988
 Adjustments to reconcile net income
  to net cash provided by operating
  activities:
  Depreciation and amortization                 231,380      174,145
  Asset impairment and other charges            205,750         --
  Store closure charge/(credit)                  (7,250)        --
  Loss on sale of accounts receivable             1,808         --
  Expense from 401K and PARS stock
   contribution                                   9,626       18,374
  Deferred income taxes expense/(benefit)        20,733       29,265
  Change in assets and liabilities, net of
   companies acquired using purchase
   accounting:
  Increase in merchandise inventories           (50,380)    (221,463)
  Increase in receivables                       (40,650)    (112,980)
  Proceeds from sale of accounts receivable     109,301         --
  Increase in prepaid expenses and other
   assets                                       (19,017)     (28,406)
  Increase in accounts payable, accrued
   expenses and other current liabilities       158,058      117,855
  Increase in other long-term obligations        12,627        7,747

                                                631,986      (15,463)
 Net cash provided by operating
  activities                                    691,698      299,525

Investing Activities:
 Acquisition of property and equipment         (450,217)    (355,081)
 Acquisition of businesses, net of cash
  acquired                                         --       (244,021)
 Proceeds from sales and maturities of
  short-term investments                           --         32,927
 Purchase of short-term investments                --        (16,651)
 Proceeds from sales and maturities of
  long-term investments                           9,156         --
 Purchase of long-term investments              (59,147)     (23,780)
 Acquisition of lease rights                       (216)        (549)
 Other                                             --         (1,875)
 Net cash used in investing activities         (500,424)    (609,030)

Financing Activities:
 Proceeds from sale of capital stock             54,207       89,239
 Proceeds from borrowings                     2,876,615    1,589,779
 Payments on borrowings                      (2,753,733)  (1,308,311)
 Purchase of treasury stock                    (133,095)    (310,238)
 Settlement of equity forward purchase
  agreement                                     (78,684)        --
 Net cash provided by/(used in) financing
  activities                                    (34,690)      60,469

 Effect of exchange rate changes on cash         (3,507)       1,526

Net (decrease) increase in cash and
 cash equivalents                               153,077     (247,510)
Cash and cash equivalents at beginning
 of period                                      110,483      357,993
Cash and cash equivalents at end of period  $   263,560  $   110,483

--30--mp/bos*

CONTACT: Staples, Inc.
Investor Contact:
Maria Sceppaguercio
Senior Vice President of Investor Relations
508-253-7963
OR
Media Contact:
Shannon Lapierre
Public Relations Manager
508-253-8468
shannon.lapierre@staples.com