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News Release

Staples Retail and Delivery Reports 10 Percent Same-Store-Sales for First Quarter

FRAMINGHAM, Mass.--(BUSINESS WIRE)--May 16, 2000--

Revenue Up 20 Percent; Net Income Jumps 21 Percent; Earnings Per

Share Grow 27 Percent; Opens Record Number of New Stores

Staples Inc. (NASDAQ:SPLS), the pioneer of the office superstore industry, today announced that its Retail and Delivery business earned net income of $63.3 million, or $.14 per common share, on a diluted basis, for the first quarter which ended April 29, 2000, compared with $52.4 million or $.11 per common share, on a diluted basis, for the prior year.

Staples Retail and Delivery results exclude the retained interest in and an adjustment to the store closure charge taken in the fourth quarter 1998.

"We've proven, once again, that there is tremendous room for profitable growth in the office supply superstore business with our 29th consecutive quarter of meeting or beating analysts' expectations," said Staples Chairman and Chief Executive Officer Thomas G. Stemberg. "Staples' outstanding first quarter results were predicated on our solid business strategy and ability to execute, merchandise, enhance our distribution capabilities and locate the best real estate sites for our stores."

Sales for the quarter rose 20 percent to $2.48 billion from $2.06 billion reported for the same period last year. Comparable sales for the 976 stores open for more than one year and delivery hubs increased 10 percent for the first quarter. Sales per store week improved slightly, 1.52 percent, despite the record number of stores the company opened during the quarter.

Gross margins for the quarter improved 10 basis points to 24.0 percent over the same period in the prior year, and return on net assets improved to 13.2 percent, 120 basis points over the same quarter in the prior year.

Staples opened 69 new stores this quarter, ahead of its office superstore competitors, and is on track to open 170 new stores in fiscal year 2000. The company also reinvested in its business with the first phase launch of, a Web-based technology that will enable vendors to have better visibility into Staples' sales data and inventory levels to improve fulfillment and delivery to the company. This and other supply chain initiatives, such as the new retail distribution center in Terre Haute, Ind., have resulted in lower distribution costs, lower inventory levels and better in-store stock levels in the retail business.

Recent multi-channel fulfillment enhancements, including the addition of a new 330,000-square-foot facility in Ontario, Calif., and an expanded delivery fleet - to 500 trucks by year end - have allowed Staples to better serve delivery customers, improve service and reduce distribution costs in its contract, catalog and e-commerce operations.

Staples' European operations continued on an upward trend, reporting a 16 percent same-store-sales increase, and management believes the company is well positioned for continued growth overseas. The company also has benefited from the 42 store locations it acquired from Metro last year.

About Staples Retail and Delivery

Staples Retail and Delivery, a division of Staples Inc., is a $9 billion provider of office supplies, furniture, technology and services to consumers and businesses of all sizes in the United States, Canada, the United Kingdom, Germany, the Netherlands and Portugal. Headquartered near Boston, Staples invented the office superstore concept and is the largest operator of office superstores in the world. The company has 50,000 employees who help customers slash the cost and hassle of running their businesses through more than 1,100 retail superstores, an e-commerce business, direct mail order operations under the brands of Staples and subsidiary Quill Corporation, and a national accounts 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 Proxy Statement on file with the Securities and Exchange Commission.



                      STAPLES RETAIL AND DELIVERY
                     (A DIVISION OF STAPLES, INC.)
                        Combined Balance Sheets
                     (Dollar Amounts in Thousands)

                                                April 29,  January 29,
                                                  2000         2000
Current Assets:
 Cash and cash equivalents                    $       651 $   110,483
 Short-term investments                             1,047       1,071
 Merchandise inventories                        1,547,780   1,607,516
 Receivables, net                                 438,383     360,901
 Inter-business receivable from         100,208        --
 Deferred income taxes                             40,095      39,730
 Prepaid expenses and other current assets         83,257      72,172
     Total current assets                       2,211,421   2,191,873

Property and Equipment:
 Land and buildings                               336,445     328,994
 Leasehold improvements                           463,060     442,119
 Equipment                                        563,194     533,771
 Furniture and fixtures                           311,888     286,260
     Total property and equipment               1,674,587   1,591,144
 Less accumulated depreciation
  and amortization                                558,095     508,810
     Net property and equipment                 1,116,492   1,082,334

Other Assets:
 Retained interest in                    --        16,254
 Lease acquisition costs, net of amortization      67,000      68,832
 Investments                                        5,055        --
 Goodwill, net of amortization                    389,406     387,595
 Deferred income taxes                               --        34,912
 Other                                             35,383      31,769
     Total other assets                           496,844     539,362
                                              $ 3,824,757 $ 3,813,569

Current Liabilities:
 Accounts payable                             $   842,113 $   897,523
 Inter-business payable to               --        23,660
 Accrued expenses and other
  current liabilities                             510,806     537,696
 Debt maturing within one year                     27,498      12,219
     Total current liabilities                  1,380,417   1,471,098

Long-Term Debt                                    543,781     500,903
Deferred Income Taxes                              29,223        --
Investment in Capital Deficiency
 of                                     4,337        --
Other Long-Term Obligations                        64,063      61,456

Divisional Net Worth:
 Preferred stock, $ .01 par value-authorized
  5,000,000 shares; no shares issued                 --          --
 Common stock:
  Staples RD Stock, $ .0006 par value
   1,500,000,000 shares authorized;
   472,312,364 shares issued and
   outstanding at April 29, 2000 and
   470,752,253 at January 29, 2000                    283         282
 Additional paid-in capital                     1,168,258   1,153,784
 Cumulative foreign currency
  translation adjustments                          (5,167)     (4,473)
 Unrealized gain on investments                       (38)        (44)
 Retained earnings                                996,048     949,039
 Less: treasury stock at cost,
  15,571,243 shares at April 29, 2000
  and 13,668,743 shares at
  January 29, 2000                               (356,448)   (318,476)
     Total divisional net worth                 1,802,936   1,780,112
                                              $ 3,824,757 $ 3,813,569

                      STAPLES RETAIL AND DELIVERY
                     (A DIVISION OF STAPLES, INC.)
                     Combined Statements of Income
           (Dollar Amounts in Thousands, Except Share Data)

                                                 13 Weeks Ended
                                             April 29,        May 1,
                                               2000            1999

Sales                                      $ 2,480,423    $ 2,060,374
Cost of goods sold and occupancy costs       1,885,532      1,568,291
     Gross profit                              594,891        492,083

Operating and other expenses:
  Operating and selling                        378,456        311,528
  Pre-opening                                    7,983          4,508
  General and administrative                    91,496         86,486
  Amortization of goodwill                       3,572          2,287
  Store closure charge                          (7,250)          --
  Interest and other expense, net                6,054          1,401

     Total operating and other expenses        480,311        406,210

   Income before income taxes                  114,580         85,873
  Income tax expense                            46,978         33,490

   Net income before retained interest
    in                              67,602         52,383

Loss related to retained interest
 in                                (20,593)        (2,069)
   Net income                              $    47,009    $    50,314

Basic net income per common share
  Historical net income per common share        $ 0.10

Diluted net income per common share
  Historical net income per common share        $ 0.10

Pro forma net income per common share
 for tracking stock:

  Basic net income per common share
   Pro forma net income per common share                       $ 0.11
  Diluted net income per common share
   Pro forma net income per common share                       $ 0.11

                      STAPLES RETAIL AND DELIVERY
                     (A DIVISION OF STAPLES, INC.)
                   Combined Statements of Cash Flows
                     (Dollar Amounts in Thousands)

                                                     13 Weeks Ended
                                                   April 29,   May 1,
                                                     2000       1999
Operating Activities:
Net income                                       $  47,009  $  50,314
Adjustments to reconcile net income to net cash
 (used in)/provided by operating activities:
    Retained interest in loss of        20,593      2,069
    Depreciation and amortization                   48,259     34,385
    Store closure charge                            (7,250)
    Expense from 401K and PARS
     stock contribution                              3,192      4,625
    Deferred income taxes
     (benefit)/expense                              (1,497)    (2,800)
    Change in assets and liabilities,
     net of companies acquired
     using purchase accounting:
     Decrease in merchandise inventories            62,345     47,238
     Increase in receivables                       (78,056)  (100,995)
     (Increase)/Decrease in prepaid
      expenses and other assets                    (20,519)    11,027
     Decrease in accounts payable, accrued
      expenses and other current liabilities       (76,126)   (42,499)
     Increase in other long-term obligations         1,749        526
                                                   (47,310)   (46,424)

Net cash (used in)/provided by
 operating activities                                 (301)      3,890

Investing Activities:
  Acquisition of property and equipment            (77,058)   (60,519)
  Acquisition of businesses,
   net of cash acquired                               --     (137,625)
  Proceeds from sales and maturities
   of short-term investments                            34     10,572
  Purchase of short-term investments                  --      (16,651)
  Purchase of long-term investments                 (5,055)      --
  Capital contribution to                 --         (104)
  Acquisition of lease rights                          335        656
  Other                                            (11,374)     2,553

Net cash used in investing activities              (93,118)  (201,118)

Financing Activities:
  Proceeds from sale of capital stock                7,049      9,973
  Proceeds from borrowings                         584,278     13,150
  Payments on borrowings                          (514,137)   (11,914)
  Purchase of treasury stock                       (37,972)   (19,779)
  Repayment of inter-business
   advance from                        (27,940)      --
  Inter-business advance to                                     (30,195)  (1,008)

  Net cash used in
   financing activities                            (18,917)  (9,578)

  Effect of exchange rate changes on cash            2,504      483

Net decrease in cash and cash equivalents         (109,832)  (206,323)
Cash and cash equivalents
 at beginning of period                            110,483    357,993
Cash and cash equivalents
 at end of period                                $     651  $ 151,670


    CONTACT: Staples Retail and Delivery
             Shannon Lapierre
             Public Relations Manager
             Bonnie Monahan
             Vice President of Investor Relations