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Staples Retail and Delivery Reports Double-Digit Same-Store-Sales for Fourth Quarter

North American Same-Store-Sales Grow 10 Percent For The Quarter And The Year

Revenue Rises 25 Percent For The Quarter, 24 Percent For The Year

Category:

Thursday, March 2, 2000 7:00 am EST

Dateline:

FRAMINGHAM, Mass.

Public Company Information:

NASDAQ:
SPLS
"Execution does make a difference. Finding great store locations, effectively displaying merchandise and controlling inventory and distribution are keys to our success. And we constantly listen to our customers to reinvent the shopping experience to offer the products and services they need at competitive prices."

FRAMINGHAM, Mass.--(BUSINESS WIRE)--Staples Inc. (NASDAQ:SPLS), the pioneer of the office superstore industry, today announced that its Retail and Delivery business earned net income of $331.3 million or $.70 per common share on a diluted basis for the year ended January 29, compared with $240.7 million or $.53 per common share earned on a diluted basis for the prior year. In the fourth quarter of 1999, the company earned net income of $129.2 million or $.28 per common share on a diluted basis, compared with $101.6 million or $.22 per common share reported for the same quarter in the prior year.

Historical data has been restated to reflect the merger with Quill Corporation and a three-for-two stock split in January 1999, and excludes store relocation and merger charges in 1998. Staples Retail and Delivery results exclude the retained interest in Staples.com.

"Staples continues to deliver strong financial performance and this quarter marks our seventh year - 28 consecutive quarters -- of meeting or beating Wall Street expectations," said Staples Chairman and Chief Executive Officer Thomas G. Stemberg. "Execution does make a difference. Finding great store locations, effectively displaying merchandise and controlling inventory and distribution are keys to our success. And we constantly listen to our customers to reinvent the shopping experience to offer the products and services they need at competitive prices."

Sales for the year rose 24 percent to $8.84 billion from $7.11 billion reported for fiscal year 1998. For the fourth quarter, sales rose 25 percent to $2.59 billion from $2.07 billion reported for the same period last year. Comparable store sales for the 938 stores open for more than one year and delivery hubs increased 9 percent for the year and increased 10 percent for the quarter.

Staples opened 23 new retail stores in the fourth quarter to end the fiscal year with 1,129 stores worldwide. Throughout the year, the company agreed to rent or purchase 18 Scotty's Home Centers locations to nearly double its presence in Florida, entered major markets such as Atlanta, and opened stores in new small and mid-sized markets. Staples also expanded its in-store offerings to consumers by adding special order furniture capabilities, pack and ship centers, payroll services and an increased depth of wireless products and services.

The company also made strides in integrating e-commerce into its retail stores, adding intranet special order kiosks in all its U.S. stores. In addition, Staples enhanced its PC business through build-to-order computer offerings from Compaq and Hewlett-Packard that enable customers to customize their own PC from Staples without the company carrying the inventory risk.

On the delivery side, Staples significantly improved service and efficiencies by rolling out three new multi-channel distribution centers to serve the company's contract, catalog and e-commerce customers and a multi-channel call center in Halifax, Nova Scotia and by adding 400 new trucks to its delivery fleet.

Staples continued to improve its European operations throughout the course of the year. A revised store format, tailored product assortment and a heavier emphasis on marketing have had a significant positive effect on same-store-sales. In addition, Staples acquired 42 office supply stores in Germany, the Netherlands and Portugal from Metro AG and launched its Quill brand in the United Kingdom.

About Staples

Staples Inc. is a $9 billion retailer of office supplies, furniture and technology to consumers and businesses from home-based businesses to Fortune 500 companies in the United States, Canada, the United Kingdom, Germany, the Netherlands and Portugal. Headquartered outside Boston, Staples invented the office superstore concept and today is the largest operator of office superstores in the world. The company has over 46,000 employees serving customers through more than 1,100 office superstores, mail order catalogs, e-commerce and a contract business. More information about the company is available at http://www.staples.com.

Certain information presented within this news 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 our most recent filings with the Securities and Exchange Commission.

STAPLES RETAIL AND DELIVERY
Combined Statements of Income
(Dollar Amounts in Thousands)
 
  (Unaudited)

13 Weeks Ended

 

52 Weeks Ended

January 29,   January 30, January 29,   January 30,
2000 1999 2000 1999
 
Sales $ 2,587,754 $ 2,069,322 $ 8,842,460 $ 7,106,303
Cost of goods sold
and occupancy
costs 1,924,812 1,541,671 6,647,769 5,384,202
Gross profit 662,942 527,651 2,194,691 1,722,101
 
Operating and other
expenses:
 
Operating and selling 355,249 271,339 1,268,099 990,239
Pre-opening 2,508 2,241 16,485 13,836
General and
administrative 82,935 82,731 337,719 299,187
Amortization of
goodwill 3,696 987 12,014 3,739
Merger-related and
integration costs -- -- -- 41,000
Store closure charge -- 49,706 -- 49,706
Interest and other
expense, net 6,744 2,391 17,183 17,342
 
Total operating and
other expenses 451,132 409,395 1,651,500 1,415,049
 
Income before equity
in loss of
affiliates, retained
interest and income
taxes 211,810 118,256 543,191 307,052
 
Income tax expense 82,606 46,711 211,845 121,330
Net income before
minority interest 129,204 71,545 331,346 185,722
Minority interest -- -- -- 135
Net income before
retained interest
in Staples.com 129,204 71,545 331,346 185,857
Loss related to
retained interest
in Staples.com (9,078) (285) (15,628) (487)
Net income $ 120,126 $ 71,260 $ 315,718 $ 185,370
 
Historical earnings
per common share:
 
Basic earnings per
common share
Historical net
loss per common
share for the
13 weeks ended
January 29, 2000 $ 0.26
 
Diluted earnings per
common share
Historical net
loss per common
share for the
13 weeks ended
January 29, 2000 $ 0.26
 
 
Pro forma earnings per
common share for
tracking stock
and S-Corporation
conversion:
 
Basic earnings per
common share
Pro forma net loss
per common share $ 0.26 $ 0.16 $ 0.69 $ 0.43
 
Diluted earnings
per common share
Pro forma net
loss per
common share $ 0.26 $ 0.15 $ 0.67 $ 0.41
STAPLES RETAIL AND DELIVERY
Combined Balance Sheets
(Dollar Amounts in Thousands)
 
  January 29,   January 30,
2000 1999
ASSETS
Current Assets:
Cash and cash equivalents $ 110,483 $ 357,993
Short-term investments 1,071 17,428
Merchandise inventories 1,607,516 1,340,432
Receivables, net 360,901 221,836
Deferred income taxes 39,730 75,261
Prepaid expenses and other current
assets 72,172 50,117
 
Total current assets 2,191,873 2,063,067
 
Property and Equipment:
Land and buildings 328,994 231,378
Leasehold improvements 442,119 372,451
Equipment 533,771 399,153
Furniture and fixtures 286,260 239,755
 
Total property and equipment 1,591,144 1,242,737
Less accumulated depreciation and
amortization 508,810 403,462
 
Net property and equipment 1,082,334 839,275
 
Other Assets:
Retained interest in Staples.com 16,254 1,962
Lease acquisition costs, net of
amortization 68,832 75,127
Goodwill, net of amortization 387,595 148,201
Deferred income taxes 34,912 28,735
Other 31,769 22,814
 
Total other assets 539,362 276,839
 
$ 3,813,569 $ 3,179,181
 
LIABILITIES AND GROUP EQUITY
Current Liabilities:
Accounts payable $ 897,523 $ 794,427
Inter-business payable to Staples.com $ 23,660
Accrued expenses and other current
liabilities 537,696 438,226
Debt maturing within one year 12,219 32,594
 
Total current liabilities 1,471,098 1,265,247
 
Long-Term Debt 500,903 205,015
Other Long-Term Obligations 61,456 52,033
Group Equity 1,780,112 1,656,886
 
$ 3,813,569 $ 3,179,181
STAPLES RETAIL AND DELIVERY
Combined Statements of Cash Flows
(Dollar Amounts in Thousands)
 
  (Unaudited)
52 Weeks Ended
January 29,   January 30,
2000 1999
Operating Activities:
Net income $ 315,718 $ 185,370
Adjustments to reconcile net income
to net cash (used in)/provided by
operating activities:
Minority interest - (135)
Retained interest in loss of Staples.com 15,628 487
Depreciation and amortization 173,093 126,870
Merger-related and integration costs - 41,000
Store closure charge - 49,706
Expense from 401K and PARS stock
contribution 18,374 12,764
Deferred income tax (benefit)/expense 29,265 (55,569)
Change in assets and liabilities, net of
companies acquired using
purchase accounting:
Increase in merchandise inventories (221,463) (211,052)
Increase in receivables (112,980) (15,993)
Increase in prepaid expenses and other
assets (27,861) (8,806)
Increase in accounts payable, accrued
expenses and other current liabilities 110,474 273,195
Increase in other long-term obligations 7,747 9,597
 
(7,723) 222,064
 
Net cash used in operating activities 307,995 407,434
 
Investing Activities:
Acquisition of property and equipment (342,615) (348,957)
Acquisition of businesses, net of cash
acquired (244,021) (13,500)
Proceeds from sales and maturities of
short-term investments 32,927 10,338
Purchase of short-term investments (16,651) (22,913)
Proceeds from sales and maturities of
long-term investments - 18,995
Purchase of long-term investments - (2,545)
Capital contributions to Staples.com (29,920) (2,449)
Acquisition of lease rights (549) (37,182)
Other (1,875) 1,208
 
Net cash used in investing activities (602,704) (397,005)
 
Financing Activities:
Proceeds from sale of capital stock 46,503 63,996
Proceeds from borrowings 1,589,779 392,261
Payments on borrowings (1,308,311) (417,323)
Purchase of dissenting shareholder
S-Corporation stock - (48,102)
Purchase of treasury stock (310,238) (7,892)
Inter-business advance from Staples.com 27,940 -

Dividends to shareholders of acquired S-Corp

-

(15,904)
 
Net cash provided by/(used in)financing
activities 45,673 (32,964)
 
Effect of exchange rate changes on cash 1,526 (560)
 
Net decrease in cash and cash equivalents (247,510) (23,095)
Cash and cash equivalents at beginning of
period 357,993 381,088
 
Cash and cash equivalents at end of period $ 110,483 $ 357,993

Contact:

Staples Inc.
Media Contact:
Shannon Lapierre, 508-253-8468
shannon.lapierre@staples.com
or
Investor Contact:
Bonnie Monahan, 508-253-7963
bonnie.monahan@staples.com

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