Staples: Global Numbers Need More Explanation

Staples (SPLS) announced that Q4 Sales Rose Eight Percent and Diluted EPS Increased 15 Percent on a Proforma Basis Excluding the Extra Week in 2006. (Click here for conference call.) The financial media almost uniformly reported quarterly profit dropped 1%, hurt by fewer customer visits and lower demand for furniture and business machines.

The company also lowered its full-year profit forecast, citing a challenging economic climate.

The company follows up with an announcement that the cash dividend has been upped by a whopping 14%. The press release relating to the dividend included the headline of “Supported by Record Full Year 2007 Free Cash Flow of $891 Million.”

They are working on swallowing up Corporate Express which may still work out for them. So let’s take a look at some of the operations. When everyone is focused on high level concepts how is the housekeeping behaving?

The international area achieved record sales of $2.7 Billion which is roughly 28% of total sales. There is next to no comment about international operations. No insights, not even a nuance. We only know of a few stores opening in Europe with this quote from the press release:“Opened three stores in Portugal, two stores in Netherlands, one store in Germany and one store in Belgium, and closed three stores in the UK during 2007, ending the year with 268 stores in Europe.”

In terms of business unit income, international represent 10% in Q4 whereas they were only 6% for the year. This means international is coming on rather rapidly.

Management needs to provide a more comprehensive overview of the international numbers. When you pop the dividend you need to explain, especially if an operating unit appears to be doing well.