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Staples.com Revenue Grows More Than 450 Percent for the Fourth Quarter and Year

Sequential Quarterly Revenue Growth of 80 Percent Driven By Repeat Customer Purchases; Significantly Increases Customer Acquisition Efforts

Category:

Thursday, March 2, 2000 7:00 am EST

Dateline:

FRAMINGHAM, Mass.

Public Company Information:

NASDAQ:
SPLS

FRAMINGHAM, Mass.--(BUSINESS WIRE)--Staples.com, Staples Inc.'s (NASDAQ:SPLS) electronic marketplace that provides office supplies, services, content and community over the Internet, reported sales of $43.1 million for the fourth quarter, which ended January 29, an increase of 80 percent from the $24 million reported for the third quarter of 1999 and a 453 percent increase from the $7.8 million reported for the fourth quarter of 1998. For fiscal year 1999, Staples.com reported sales of $94.3 million, a 458 percent increase from the $16.9 million reported for fiscal year 1998.

The business reported a net loss of $9.8 million for the fourth quarter compared with a net loss of $0.3 million for the same quarter in the prior year, and reported a net loss of $16.4 million for the year, compared with a net loss of $0.5 million for fiscal year 1998.

All historical data has been restated for the company's 1998 merger with Quill Corporation under the pooling of interest method of accounting.

"Our financial results speak for themselves," said Jeanne Lewis, president of Staples.com. "The current growth in business-to-business e-commerce, we believe, offers exciting potential for Staples.com and the time to capitalize on this is now. To attempt to make Staples.com the clear leader in the marketplace, we will invest in acquiring new customers and in the people power and site enhancements that will help us retain our most valuable asset, our customers."

Q1`99   Q2`99   Q3`99   Q4`99
 
Sales 421% 455% 493% 453%
(increase over same quarter, prior year)
 
Sales 50% 34% 54% 80%
(increase over previous quarter)
 
Gross Profit Rate 23% 23% 23% 20%
 
 
Number of Repeat Customers 53,000 82,000
(repeat customers making at least one
purchase during the quarter)

Given the strong results for the quarter, Staples.com has concluded that increasing its investment is prudent. The company intends to try to gain market share by accelerating its plans. Consequently, Staples.com is targeting sales in excess of $250 million in fiscal year 2000, with losses in the range of $150 million.

During the quarter, Staples.com:

- Filed with the Securities and Exchange Commission for a proposed initial public offering for Staples.com common stock; - Created an advisory board with Internet thought leaders including Meg Whitman from eBay, Bill Sahlman from Harvard Business School and representatives from its venture capital partners;

- Made a strategic investment in quote request service provider BizBuyer.com to provide customers with an opportunity to sell their products and services to each other;

- Was awarded the "Golden Paperclip" from Office Solutions Magazine for having the best online office supplies shopping experience with excellent site design, competitive prices and a liberal return policy; and

- Launched an enhanced e-commerce site, StaplesLink.com, for its contract customers to offer a high level of procurement functionality designed to appeal to businesses which require high levels of procurement control. During the year, Staples.com:

- Named Jeanne Lewis, formerly executive vice president of marketing for Staples Inc., president of Staples.com;

- Launched the Staples.com Business Solutions Center to enhance service and content offerings for small business;

- Completed six major site upgrades, including adding the back end integration of Staples.com, to provide real time inventory visibility for customers;

- Expanded SKU assortment on Staples.com to more than 130,000; and

- Invested and partnered with online companies DSL.net, register.com, HotOffice Technologies, Inc. and Point.com.

About Staples.com

Staples.com is creating a leading business-to-business electronic

marketplace offering a comprehensive solution for all of the office needs of business customers. Staples.com currently provides an electronic marketplace where small, mid-sized and large businesses can procure office products and business services and obtain business information and expert content. Staples.com includes the operations of all three of Staples Inc.'s e-commerce sites, Staples.com, Quillcorp.com and StaplesLink.com.

Certain information presented within this news release constitutes forward-looking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, such as the mix of products and services sold, levels of competition and actions taken by our competitors, the growth of commerce on the Internet, our ability to fulfill orders on a timely and cost-effective basis and other factors discussed in our most recent registration statement on form S-3 on file with the Securities and Exchange Commission.

STAPLES.COM
Statements of Operations
(Dollar Amounts in Thousands)
 
 
 
(Unaudited)
13 Weeks Ended   52 Weeks Ended
Jan. 29,   Jan. 30, Jan. 29,   Jan. 30,
2000 1999 2000 1999
 
Sales $ 43,068 $ 7,781 $ 94,349 $ 16,886
Cost of goods sold
and occupancy costs 34,323 6,045 73,794 12,721
Gross profit 8,745 1,736 20,555 4,165
 
Operating and other expenses:
Operating and selling 14,008 1,319 27,063 2,058
Site development costs 1,925 291 4,050 939
General and administrative 9,088 579 16,341 1,931
Interest and other expense, net (197) 18 (82) 28
Total operating
and other expenses 24,824 2,207 47,372 4,956
 
 
Loss before income taxes (16,079) (471) (26,817) (791)
Income tax benefit (6,271) (186) (10,459) (304)
Net loss $ (9,808) $ (285) $ (16,358) $ (487)
 
 
Net loss attributed to:
Staples.com Stock $ (730) $ - $ (730) $ -
Staples Stock (9,078) (285) (15,628) (487)
$ (9,808) $ (285) $ (16,358) $ (487)
 

Historical earnings per common share:

 

Basic earnings per common share
Historical net loss
per common share
for the 13 weeks
ended January 29, 2000 $ (0.05)

Diluted earnings per common share

 

Historical net loss
per common share
for the 13 weeks
ended January 29, 2000 $ (0.05)
 

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 $ (0.04) $ - $ (0.08) $ -

Diluted earnings per common share

 

Pro forma net loss
per common share $ (0.04) $ - $ (0.08) $ -
STAPLES.COM
Balance Sheets
(Dollar Amounts in Thousands)
 
 
 
January 29,   January 30,
2000 1999
 
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ --
Prepaid expenses and other current assets 1,578 1,033
Inter-business receivable from Staples RD 23,660 --
Total current assets 25,238 1,033
 
Equipment:
Equipment 13,538 1,072
Less accumulated depreciation 1,110 58
Net equipment 12,428 1,014
 
Other Assets:
Investments 34,755 --
Total other assets 34,755 --
$ 72,421 $ 2,047
 
LIABILITIES AND GROUP EQUITY
Current Liabilities:

Accrued expenses and other current liabilities

$ 7,466

$ 85
Total current liabilities 7,466 85
 
Group equity 64,955 1,962
$ 72,421 $ 2,047
STAPLES.COM
Statements of Cash Flows
(Dollar Amounts in Thousands)
 
(Unaudited)
52 Weeks Ended
January 29,   January 30,
2000 1999
Operating Activities:
Net income $ (16,358) $ (487)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,052 58
Change in assets and liabilities:
Increase in prepaid expenses and other assets (545) (1,033)
Increase in accounts payable, accrued
expenses and other current liabilities 7,381 85
7,888 (890)
Net cash used in operating activities (8,470) (1,377)
 
Investing Activities:
Acquisition of property and equipment (12,466) (1,072)
Purchase of long-term investments (23,780) --
Net cash used in investing activities (36,246) (1,072)
 
Financing Activities:
Net proceeds from sale of capital stock 42,736 --
Inter-business advance to Staples RD (27,940) --
Proceeds from borrowings 14,796 1,377
Repayment of borrowings (14,796) (1,377)
Capital contributions from Staples RD 29,920 2,449
Net cash provided by financing activities 44,716 2,449
 
Net decrease in cash and cash equivalents -- --

Cash and cash equivalents at beginning of period

--

--
Cash and cash equivalents at end of period $ -- $ --

Contact:

Staples Inc.
MEDIA CONTACT:
Shannon Lapierre, 508-253-8468
Public Relations Manager
shannon.lapierre@staples.com
or
INVESTOR CONTACT:
Bonnie Monahan, 508-253-7963
Vice President of Investor Relations
bonnie.monahan@staples.com

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