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Staples, Inc. Announces Fourth Quarter And Full Year 2012 Performance

On a GAAP basis, the company reported a net loss from continuing operations attributable to Staples, Inc. of $161 million, or $0.24 per share, compared to net income of $988 million, or $1.40 per diluted share, achieved in 2011. Excluding the impact of the charges taken during the fourth quarter of 2012 described above, as well as previously announced charges recorded during 2012 and a tax refund in 2011, the company reported non-GAAP net income from continuing operations attributable to Staples, Inc. of $936 million, or $1.39 per diluted share, during 2012, compared to $967 million, or $1.37 per diluted share, achieved during the prior year.

The company generated operating cash flow of $1.2 billion and invested $350 million in capital expenditures in 2012, resulting in free cash flow of $870 million for the full year. The company utilized free cash flow to repurchase 35 million shares for $449 million and returned $294 million to shareholders through cash dividends in 2012. At the end of the year, the company had $2.5 billion in liquidity, including $1.3 billion in cash and cash equivalents.

New Segment Reporting Structure

As part of Staples’ strategic reinvention, the company realigned its business segments during the fourth quarter of 2012 to support growth and better address the changing needs of its customers. Under the new structure, the North American Stores and Online segment includes the company’s retail stores and Staples.com businesses in the U.S. and Canada. The North American Commercial segment includes the company’s Contract operations in the U.S. and Canada, as well as the company’s Quill.com business. The International Operations segment includes all of the company’s continuing operations outside of the U.S. and Canada.

 

North American Stores and Online

  Fourth Quarter   Full Year
(dollar amounts in millions) 2012   2011   Change 2012   2011   Change
Sales $3,298 $3,197 3.1% $11,828 $11,742 0.7%
Sales excluding the 53rd week in 2012* $3,076 $3,197 (3.8%) $11,606 $11,742 (1.2%)
Comparable store sales (5.0%) (2.0%)
 
Operating income $317 $296 $21 $987 $1,021 ($34)
Operating income rate   9.6%   9.2%   37 basis points   8.3%   8.7%   (35 basis points)

*Indicates a non-GAAP measure. Refer to “Presentation of Non-GAAP Information” and the accompanying reconciliations for more detailed information about this non-GAAP measure.

Sales for the fourth quarter of 2012 were $3.3 billion, an increase of three percent compared to the fourth quarter of 2011. This primarily reflects $221 million of sales during the extra week in 2012. Growth in tablets, e-readers, facilities and breakroom supplies, and copy and print services was partially offset by lower sales of computers, digital cameras, and software. Excluding the extra week of sales in 2012, fourth quarter sales decreased four percent versus the prior year. Comparable store sales, which exclude sales in Staples.com, decreased five percent, reflecting a five percent decline in traffic, and flat average order size versus the prior year. Staples.com sales grew seven percent during the fourth quarter of 2012. Excluding the extra week in 2012, Staples.com sales declined one percent during the fourth quarter of 2012. Operating income rate increased 37 basis points to 9.61 percent compared to the fourth quarter of 2011. This increase primarily reflects lower incentive compensation and marketing expense, partially offset by investments to drive growth in Staples.com. During the fourth quarter of 2012, the company closed 32 stores and opened one store in the U.S. and closed one store and opened one store in Canada.

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