May 20, 2008
Staples (Nasdaq: SPLS ) continued to prove why it's the savviest operator in the office supply business with this morning's first-quarter earnings release. Diluted earnings per share grew only a penny, to $0.30 for the quarter, but total sales managed a 6% boost in what is turning out to be a very challenging environment for retailers.
Staples is best known for its North American retail sales, which grew 1.9% and accounted for just less than half of total sales for the quarter. Same-store sales were weak, though, falling 6% as consumers postponed big-ticket purchases like furniture, the company's weakest product category. Management conceded that its core consumer is struggling thanks to record energy and food prices, but not sitting still. It specifically cited record levels of customer service scores and solid trends in its exclusive line of Dell (Nasdaq: DELL ) laptops, ink, and toner, with similar success in newly introduced Officejet printers from Hewlett-Packard (NYSE: HPQ ) .
It also runs a successful delivery business in North America, which saw a respectable 8% top-line boost and 5% organic growth via customer acquisition. The star for the quarter was -- surprise -- international, which experienced a 19% sales increase and a stellar 53.8% jump in profitability, thanks to a weak dollar and stronger trends in South America and Asia in particular. Staples is gearing up to become even stronger overseas, as it recently went hostile in its pursuit of Dutch rival Corporate Express (NYSE: CXP ) .
Staples also did a nice job of controlling inventory, which served to boost operating cash flow to $299.2 million, leaving ample room for capital expenditures and to sustain a dividend yield of 1.4%. Add it all up, and the results were fairly impressive, especially considering that archrivals Office Depot (NYSE: ODP ) and OfficeMax (NYSE: OMX ) continue to flail. In stark contrast, Staples has found a consistent way to deliver, and it's increasingly aiming to operate on a global scale.