Despite softer-than-expected sales growth in North American retail, during a conference call Ron Sargent, chairman and CEO, said, "North American retail gained market share in many categories and delivered solid operating profit margins." The softening, he said, "suggests that consumer and very small business customers are feeling pressure. Yet, our delivery business is showing no signs of deceleration."
Company-wide net income for the quarter was $209 million. Total company sales were $4.6 billion.
During first quarter, it opened 24 new stores in the US, one each in Germany, Portugal and Belgium, and 17 in China, including those in its recent acquisition of Pei Pei. Plans call for 100 additional stores in North America this year. Denver is a new target market, and more units are scheduled for Chicago and South Florida, markets the company entered in 2005 and 2006, respectively. In all, there are now 1,927 Staples units worldwide.
On the day of the conference call, Staples also announced that it had agreed to acquire Overland Park, KS-based American Identity from Republic Financial Corp. for an undisclosed price. American Identity is one of the world's largest distributors of corporate-branded promotional products.
Sargent said it gives Staples "strong access to the $18-billion promotional product market," and he expects it to "increase share of spend" with Staples' customers. He anticipates it will add between 1% and 2% to sales in the first year. American Identity will continue to operate as a separate business and provide products through Staples' North American Delivery and Retail businesses.
During first-quarter Staples also continued to invest in its Easy Tech program and Copy Center services. Now, every Staples store in North America has at least one resident tech person, according to Sargent.
The company also completed the rollout of four collections of new furniture assortments. It launched a new rewards program that offers small business customers 10% back on their most frequently purchased products. In all markets, Sargent said, "we are redoubling efforts to address small business needs."
International sales increased 16% in US dollars and 5% in local currency during first quarter. France and the UK, the largest of its international markets, saw "good progress," Sargent said. He also pointed to increases in Portugal and Italy and a "slight loss in Asia and South America."
While expressing caution for the year, Staples maintained its earnings guidance of between 15% and 20% growth for second quarter and the full year. However, management now anticipates earnings per share growth will be at the low end of the range.
SPLS stock closed at $25.05 a share, a 2.4%-drop for the day, on the Nasdaq on May 22, following the release of its first-quarter financials. The 52-week trading range is between $28 a share to $21.08 a share.
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