WESTBOROUGH, Mass.--(BUSINESS WIRE)--Staples, Inc. (NASDAQ:SPLS), today announced a 50% increase in diluted earnings per share for the first fiscal quarter ended May 2, 1998 to $0.12 per share as compared with $0.08 per share (before merger related charges) in the prior year.

Total sales for the first quarter rose 31% to $1.5 billion as compared with $1.1 billion in the prior year. Comparable sales in the 641 stores and delivery hubs that have been open for more than one year increased 11% for the quarter.

Net income rose 49% to $31.3 million as compared with $20.9 million in the prior year period, before merger related charges.

Thomas G. Stemberg, Chairman and CEO commented, ''In addition to another quarter of strong sales and earnings growth, we were very pleased to announce this quarter the acquisition of the Quill Corporation and the purchase of 32 store leases in a number of markets, primarily in New Jersey. Staples continues to make significant investments in long-term sales and earnings growth while still achieving some of the best current results in the retail industry.''

The following are some of the other achievements the Company recorded in the first quarter:

--  The Company opened 41 stores and closed one. The Company ended the quarter with 613 stores in the United States, 109 stores in Canada, 42 stores in the United Kingdom and 18 stores in Germany.

--  The Company opened its second major new retail distribution facility in Killingly, CT.

Staples, Inc. is a $5 billion retailer of office supplies, furniture and technology to businesses from home based businesses to Fortune 50 companies in the United States, Canada, the United Kingdom and Germany. Staples, headquartered outside Boston, Mass., invented the office superstore concept and today is the largest operator of office superstores in the world. The Company, which has grown earnings per share at a 40% compounded rate over the last five years, has 30,000 employees serving the business customer through 782 office superstores, mail order catalogs and a contract business.

More information may be obtained from the Company's Investor Relations department by dialing (800) INV-SPL1 or from the Company's website at http://www.staples.com.

Certain information presented within this press release may constitute forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, which are discussed in the Company's most recent filing on Forms 10-K and 10-Q on file with the Securities and Exchange Commission.

                    Staples, Inc. and Subsidiaries
                   Consolidated Statements of Income
           (Dollar Amounts in Thousands, Except Share Data)

                                             13 Weeks Ended
                                      May 2,             May 3,
                                        1998               1997
                                    $         %         $        %
Sales                        $  1,517,472  100.00% $1,154,994 100.00%
Cost of goods sold
 and occupancy costs            1,160,793   76.50%    886,239  76.73%
 Gross profit                     356,679   23.50%    268,755  23.27%

Operating expenses:
  Operating and selling           241,806   15.93%    184,794  16.00%
  Pre-opening                       3,352    0.22%      2,862   0.25%
  General and administrative       54,391    3.58%     36,012   3.12%
  Amortization of goodwill            925    0.06%        572   0.05%
    Total operating expenses      300,474   19.80%    224,240  19.41%

    Operating income               56,205    3.70%     44,515   3.85%

Other income (expense):
  Interest and other expense,
   net                             (4,944)  (0.33%)    (4,219) (0.37%)
  Merger-related costs                  0    0.00%    (20,562) (1.78%)

   Total other income
    (expense)                      (4,944)  (0.33%)   (24,781) (2.15%)

   Income before equity in loss
    of affiliates and income
    taxes                          51,261    3.38%     19,734   1.71%
 Equity in gain/(loss) of
  affiliates                            0    0.00%     (5,953) (0.52%)

   Income before income taxes      51,261    3.38%     13,781   1.19%
Income tax expense                 20,011    1.32%      5,375   0.47%

   Net income before minority
    interest                       31,250    2.06%     19,156   1.66%
Minority interest                      50    0.00%          0   0.00%

   Net income                $     31,300    2.06% $    8,406   0.73%
Earnings per common share -
 assuming dilution           $       0.12          $     0.03
Number of shares used in
 computing net income per
 common share                 281,754,828         251,361,238

                    Staples, Inc. and Subsidiaries
                      Consolidated Balance Sheets
           (Dollar Amounts in Thousands, Except Share Data)

                                                 May 2,
                                                  1998     January 31,
                                              (Unaudited)       1998
ASSETS
Current Assets:
 Cash and cash equivalents                    $  229,131   $  355,238
 Short-term investments                            1,167        2,666
 Merchandise inventories                       1,101,303    1,092,410
 Receivables, net                                184,191      151,885
 Prepaid expenses and other
  current assets                                  57,729       64,134
    Total current assets                       1,573,521    1,666,333

Property and Equipment:
 Land and buildings                              130,479      117,858
 Leasehold improvements                          302,427      288,213
 Equipment                                       267,441      257,116
 Furniture and fixtures                          180,002      168,411
    Total property and equipment                 880,349      831,598
 Less accumulated depreciation and
  amortization                                   283,384      257,627
    Net property and equipment                   596,965      573,971

Other Assets:
 Lease acquisition costs, net of
  amortization                                    79,148       43,244
 Goodwill, net of amortization                   136,745      139,753
 Other                                            28,752       31,209
    Total other assets                           244,645      214,206
                                              $2,415,131   $2,454,510
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Accounts payable                             $  591,732   $  641,851
 Accrued expenses and other current
  liabilities                                    254,067      259,290
 Debt maturing within one year                    15,499       39,779
    Total current liabilities                    861,298      940,920

Long-Term Debt                                   208,342      208,876
Other Long-Term Obligations                       42,930       37,103
Convertible Debentures                           300,000      300,000
Stockholders' Equity:
 Preferred stock, $.01 par value-authorized
  5,000,000 shares; no shares issued
 Common stock, $.0006 par value-authorized
  500,000,000 shares; issued 256,352,015
  shares at May 2, 1998 and 252,169,891 shares
  at January 31, 1998                                106          106
 Additional paid-in capital                      595,399      593,895
 Cumulative foreign currency translation
  adjustments                                     (8,117)     (10,315)
 Unrealized gain/(loss) on short-term
  investments                                          2            4
 Retained earnings                               415,432      384,132
 Less: 59,149 shares of treasury stock, at cost     (346)        (346)
 Minority interest                                    85          135
  Total stockholders' equity                   1,002,561      967,611
                                              $2,415,131   $2,454,510

                    Staples, Inc. and Subsidiaries
                 Consolidated Statements of Cash Flows
                     (Dollar Amounts in Thousands)

                                                    (Unaudited)
                                                   13 Weeks Ended
                                                 May 2,       May 3,
                                                  1998         1997
Operating Activities:
 Net income                                    $  31,300    $   8,406
 Adjustments to reconcile net income to
  net cash provided by/(used in) operating
  activities:
    Minority interest                                (50)           0
    Depreciation and amortization                 25,645       18,889
    Equity in loss of affiliates                       0        5,953
    Net increase in deferred tax assets            2,795       (3,456)
    (Increase)/decrease in assets:
      Merchandise inventories                     (5,967)     (16,760)
      Receivables                                (31,655)      (7,023)
      Prepaid expenses and other assets            9,601          862
    (Decrease)/increase in accounts payable,
      accrued expenses and other current
      liabilities                                (59,648)      29,786
    Increase in other long-term obligations        5,666        2,276
                                                 (53,613)      30,527
 Net cash (used in)/provided by operating
  activities                                     (22,313)      38,933

Investing Activities:
 Acquisition of property and equipment           (46,644)     (36,174)
 Proceeds from sales and maturities of
  short-term investments                           8,353        3,123
 Purchase of short-term investments               (6,854)           0
 Investment in affiliates                            762       (1,670)
 Acquisition of lease rights                     (36,826)        (375)
 Other                                             6,242       (1,991)
 Net cash used in investing activities           (74,967)     (37,087)

Financing Activities:
 Proceeds from sale of capital stock              (4,133)       3,513
 Proceeds from borrowings                           (334)     365,627
 Payments on borrowings                          (24,814)    (301,261)
 Net cash (used in)/provided by
  financing activities                           (29,281)      67,879

 Effect of exchange rate changes on cash             454       (1,073)

Net (decrease)/increase in cash and
 cash equivalents                               (126,107)      68,652
Cash and cash equivalents at beginning
 of period                                       355,238       98,143
Cash and cash equivalents at end of period     $ 229,131    $ 166,795