Staples Net Falls 5% but Tops Estimates, Issues Strong Guidance

Staples saw its Q3 net earnings fall 5% Y/Y, topping EPS estimates by $0.02 on an adjusted basis, and predicted "earnings per share growth of approximately 15% for both the fourth quarter and the full year." The company grew sales 9% despite a 3% decline in North American same-store sales and forecast continued "high single digit" sales growth in Q4 and FY2008. Shares were up 10.53% in pre-market trading Tuesday (as of 8:41 AM ET). "While the economic environment in North America remains challenging, we are pleased to deliver profitable growth," said Chairman and CEO Ron Sargent (full earnings call transcript later today). Q3 adjusted EPS were $0.42 on sales of $5.17 billion; analysts were expecting adjusted EPS of $0.40 on sales of $5.1 billion, on average. The company expects international growth to remain a major sales driver, with low double-digit sales growth expected in local currencies, versus total growth (including U.S. operations) in the high single-digits. Based on its current estimates, Staples expects Q4 EPS of $0.53 and FY2008 EPS of $1.70. Current consensus analyst estimates are for Q4 EPS of $0.48 and FY2008 EPS of $1.63.

Sources: Press release, Reuters, MarketWatch, TradingMarkets.com
Commentary: Staples: Accelerating Growth in a Decelerating Market • Office Depot Is Cheap Relative To Peers Staples and OfficeMax
Stocks/ETFs to watch: SPLS. Competitors: ODP, OMX. ETFs: PMR
Earnings call transcript: Staples Q2 2007

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