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Staples, Inc. Announces Third Quarter 2013 Performance

Stocks in this article: SPLS

Staples, Inc. (Nasdaq: SPLS) announced today the results for its third quarter ended November 2, 2013. Total company sales for the third quarter of 2013 were $6.1 billion, a decrease of four percent compared to the third quarter of 2012. Third quarter 2013 total company sales growth was negatively impacted by one percent due to 107 store closures in North America and Europe during the 12 months preceding the third quarter of 2013. The foreign exchange impact from the stronger U.S. dollar also negatively impacted total company sales growth by one percent during the third quarter of 2013.

“It’s been a year since we announced our strategic reinvention, and we’re evolving our business to meet the changing needs of customers,” said Ron Sargent, Staples’ chairman and chief executive officer. “We continue to face weak demand for core office supplies, but we’re driving growth online and in new categories, while aggressively managing expenses.”

Third Quarter 2013 Reinvention Highlights

  • Launched the biggest refresh to and since 2005
  • Added data science expertise and a Silicon Valley presence with the acquisition of Runa
  • Increased assortment on by nearly 50 percent with the addition of 70,000 products
  • Rolled out new collaborative contract selling model in North America
  • Achieved 2013 cost reduction goal of $150 million ahead of schedule
  • Continued to aggressively reduce expenses and streamline organization in Europe

Third Quarter 2013 Financial Summary

Third Quarter
(dollar amounts in millions) 2013 2012 Change
Total company sales $6,112 $6,353 (3.8%)
GAAP operating income $367 ($357) $724
Non-GAAP operating income* $431 $500 ($69)
GAAP operating income rate 6.0% (5.6%) 1,162 basis points
Non-GAAP operating income rate* 7.0% 7.9% (82 basis points)
GAAP income from continuing operations $220 ($569) $789
Non-GAAP income from continuing operations* $274 $310 ($36)
GAAP earnings per diluted share from continuing operations $0.34 ($0.85) NM
Non-GAAP earnings per diluted share from continuing operations*     $0.42     $0.46     (9%)

*Indicates a non-GAAP measure. Refer to “Presentation of Non-GAAP Information” and the accompanying reconciliations for more detailed information about these non-GAAP measures. Non-GAAP operating income, non-GAAP operating income rate, non-GAAP income from continuing operations, and non-GAAP earnings per diluted share from continuing operations exclude the impact of Q3 2013 charges related to employee severance and other associated restructuring activities, as well as the impact of Q3 2012 charges related to the impairment of goodwill and other assets, restructuring charges and accelerated tradename amortization. Non-GAAP income from continuing operations and non-GAAP earnings per diluted share from continuing operations also excludes Q3 2012 tax charges. In total, these charges negatively impacted Q3 2013 GAAP earnings per share from continuing operations by $0.08 and Q3 2012 GAAP earnings per share from continuing operations by $1.31.

On a GAAP basis, the company reported third quarter 2013 income from continuing operations of $220 million, or $0.34 per share, compared to a loss of $569 million, or $0.85 per diluted share, achieved in the third quarter of 2012. Excluding the impact of $64 million of pre-tax charges related to employee severance and other associated restructuring activities during the third quarter of 2013, the company reported non-GAAP income from continuing operations of $274 million, or $0.42 per diluted share, compared to third quarter 2012 non-GAAP income of $310 million, or $0.46 per diluted share.

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