By ASHLEY M. HEHERCHICAGO (AP) ¿ Customers who shied away from buying expensive office furniture and gadgets helped drag down results at Staples Inc., which posted a 14 percent drop in fourth-quarter profit and missed Wall Street expectations. But executives at the world's largest office supplier told investors that the first quarter was so far better than the previous quarter, when results were also hurt by hefty one-time charges, while cautioning they expect 2009 to remain "tough." "I think the economy is on life support, but i do think it will recover," Chairman and Chief Executive Ron Sargent told analysts during a conference call. "When I look out, there's some early indications that things are getting better in our retail business. ... I think 2009 is going to be an improving year, but not a good one." For the three months that ended Jan. 31, the Framingham, Mass.-based retailer earned $286 million, or 40 cents per share. That's down from $333.2 million, or 47 cents per share, during the same period last year. One-time items in the quarter include charges linked to July's acquisition of Corporate Express NV and the reversal of a $57 million non-cash charge recorded in the third quarter. Excluding those items, the company's adjusted profit was $256 million, or 36 cents per share for the quarter.
Analysts surveyed by Thomson Reuters, who typically exclude one-time items, predicted earnings of 42 cents per share on revenue of $6.82 billion. Sales climbed 16 percent to $6.17 billion from $5.32 billion, helped by the addition of Corporate Express. "Demand for furniture and technology remains very soft while consumables, like ink, toner, and paper are performing much better," said Staples president and Chief Operating Officer Mike Miles. Standard & Poor's analyst Michael Souers said he was maintaining his buy rating on Staples shares Wednesday but cut his price target to $19, from $21, and lowered earnings estimates in 2010 and 2011. "While we continue to favor the long-term cost synergies and market share gains resulting from the July 2008 Corporate Express acquisition, we are projecting increasingly pessimistic business conditions throughout (fiscal year 2010)," he wrote to investors. During the quarter, Staples' same-store sales fell 13 percent in North America. Same-store sales, or sales at stores open at least a year, is an important retail performance indicator because it measures only sales at existing locations.
Executives said same-store sales in the U.S. and Canada were down about 9 percent during the several weeks of the first quarter. "In January and February, we've seen improvement in the trend, " Miles said. "But week-to-week trends remain choppy." For the year, profit fell 19 percent to $805.3 million, or $1.13 per share, from $995.7 million, or $1.38 per share. Sales increased to $23.08 billion from $19.37 billion. "In both good times and bad our job is to deliver the positive results that our shareholders expect," said CEO Sargent. "And while we're not satisfied with our absolute results, our relative performance has never been stronger." Staples said it ended 2008 with liquidity of about $1.6 billion, consisting of $634 million in cash and cash equivalents and $936 million of available credit. Staples, which said it wouldn't provide an earnings or sales outlook because of the murky economic environment, also declared a regular quarterly dividend of 8.25 cents. Staples shares fell 27 cents, or 1.7 percent, to close at $15.47 Wednesday.
___ On the Net: www.staples.com ___ AP Retail Writer Michelle Chapman in New York contributed to this report.