Staples Edges Past Estimates

Shares jump on an earnings beat.
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Updated from 9:21 a.m. EST

Staples'

(SPLS)

third-quarter profit declined 5.3% on a litigation charge and a weak retail environment in North America, but the earnings managed to top Wall Street's targets.

Shares of the office-supply retailer were jumping $2.24, or 11%, to $22 Tuesday.

For the quarter ended Nov. 3, Framingham, Mass.-based Staples earned $274.5 million, or 38 cents a share, compared with $289.9 million, or 39 cents a share, a year earlier.

Excluding a $24 million charge from the settlement of a class-action lawsuit, earnings per share rose 17% to 42 cents. Analysts, on average, expected earnings of 40 cents a share on this basis, according to Thomson Financial.

Staples' sales rose 8.7% to $5.17 billion from $4.76 billion a year earlier, shy of analysts' mean estimate of $5.19 billion.

In the key North America market, retail sales rose 3%. Same-store sales, or sales at stores open at least a year, slipped 3%. Staples said lower sales in business machines, furniture and computers offset strong sales in copy and print centers and office supplies.

Like most retailers, Staples has been battling a slowdown in the U.S. as the housing slump and credit crunch weigh on consumer spending. Last week, rival

Office Depot

(ODP) - Get Report

posted a 9% decline in third-quarter earnings and reported a further softening of sales in the fourth quarter.

For its part, Staples reiterated its forecast for full-year earnings per share growth of 15%. The company still anticipates flat to slightly negative same-store sales in North American retail.

Staples also said it expects earnings-per-share growth in the low teens for fiscal 2008, with high-single-digit sales growth. The company sees a low-single-digit same-store sales increase in North American retail.