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Staples, Inc. Announces Third Quarter 2012 Performance

Stocks in this article: SPLS

International Operations

Sales in International Operations for the third quarter were $1.1 billion, a decrease of 12 percent in U.S. dollars and a decrease of eight percent on a local currency basis compared to the third quarter of 2011. These results reflect weak sales in Europe and Australia. Economic weakness drove declines in the company’s European delivery businesses, as well as a six percent decline in comparable store sales in Europe. Operating income rate decreased 302 basis points to an operating loss of 0.15 percent compared to the third quarter of 2011. Excluding $16 million of accelerated Australia tradename amortization during the third quarter, operating income rate decreased 160 basis points to 1.27 percent compared to the prior year. This decrease primarily reflects deleverage of fixed expenses in Europe and Australia, as well as lower product margins in Europe, partially offset by savings related to headcount reductions in Europe and Australia.

Discontinued Operations

During the third quarter of 2012, the company recorded an after-tax loss from discontinued operations of $28 million related to its European Printing Systems business, which includes $23 million of charges related to restructuring and incremental tax expense. This compares to net income of $3 million from discontinued operations achieved in the third quarter of 2011.

Outlook

The company’s financial guidance includes the impact of the 53rd week in fiscal year 2012 as well as the impact of foreign currency exchange rates. The company expects full year sales to be flat compared to the prior year. The company expects full year non-GAAP diluted earnings per share from continuing operations to increase in the low single-digits versus non-GAAP diluted earnings per share from continuing operations of $1.37 achieved in 2011. The company’s full year non-GAAP diluted earnings per share estimate excludes the charges incurred during the third quarter of 2012, as well as approximately $160 million to $200 million of previously announced pre-tax charges related to European restructuring, U.S. store closures and accelerated Australian tradename amortization that the company plans to record during the fourth quarter of 2012.

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