Staples 3Q profit drops 43 percent on charges

CHICAGO (AP) -- Staples Inc., the world's largest office supplier, said Tuesday that its third-quarter profit sank 43 percent because of hefty charges from restructuring and the acquisition of European rival Corporate Express.

But excluding the charges, its results topped Wall Street estimates, despite a dip in retail sales. Its shares rose almost 6 percent in morning trading.

For the three months ending Nov. 1, the Framingham, Mass.-based retailer earned $156.7 million, or 22 cents per share, down from $274.5 million, or 38 cents per share, during the same period last year.

Excluding items, Staples earned 42 cents, a penny ahead of forecasts of analysts polled by Thomson Reuters.

The charges included $124 million to discontinue the use of trade names Staples obtained from a 2002 acquisition, $9 million from its acquisition of Dutch office supply chain Corporate Express NV and $57 million for tax planning strategies related to the $2.7 billion acquisition of Corporate Express this July.

Analysts polled by Thomson Reuters expected profit of 41 cents per share, which typically exclude one-time items.

Revenue rose 35 percent to $7 billion from $5.17 billion a year ago. Analysts predicted revenue of $7.03 billion.

The boost in revenue came from the delivery and international divisions, which recorded increases in revenue largely thanks to sales from Corporate Express.

North American retail sales, meanwhile, fell 6 percent with same-store sales, or sales at stores open at least a year, skidded 8 percent.

Same-store sales are a key indicator of retailer performance since they measure sales at existing stores.

The company said the dip reflected a decline in average order size, slower traffic and weakness in computers, accessories, business machines and furniture sales.

"The economic environment remains challenging and we saw particular weakness during October at the height of the financial crisis," Chairman and Chief Executive Ron Sargent told investors during a conference call Tuesday morning. "... We know from our experience during previous downturns that if we continue to take care of our customers, invest in the business and control expenses and capital spending, we will come out on the other side even stronger than before."

Staples shares rose 90 cents to $16.02 in morning trading Tuesday.