Business News
Staples, Inc. Announces Fourth Quarter and Full Year 2010 Performance
Wednesday 02. March 2011 - Staples, Inc. (Nasdaq: SPLS) announced today the results for its fourth quarter and fiscal year ended January 29, 2011. Total company sales for the fourth quarter of 2010 increased slightly to $6.4 billion compared to the fourth quarter of 2009. Net income for the fourth quarter of 2010 increased 17 percent year over year to $275 million, and diluted earnings per share, on a GAAP basis, increased 19 percent to $0.38 from the $0.32 achieved in the fourth quarter of last year.
The companys effective tax rate for the fourth quarter of 2010 was 26.6%, which favorably impacted the companys fully diluted GAAP and adjusted earnings per share by approximately $0.06 when compared to the companys previous guidance. This was the result of the United States Congresss December 2010 extension of certain provisions in the tax code that allow for the deferral of income tax on certain foreign earnings. This legislation resulted in a 34.5% effective tax rate for the full year 2010, versus the companys previous guidance for a 37.5% effective tax rate.
Adjusted earnings per share, on a diluted basis, increased three percent during the fourth quarter of 2010 to $0.39 from $0.38 last year. This excludes, in 2010, pre-tax integration and restructuring expense of $6 million related to Corporate Express, as well as, for 2009, $20 million of pre-tax integration and restructuring expense and $42 million related to a settlement of several retail wage and hour class action lawsuits.
The company estimates the negative impact from inclement weather during the fourth quarter to be approximately $70 million in sales worldwide, or approximately $0.03 of earnings per
share. In addition, subsequent promotional activity intended to regain lost sales had a negative impact of approximately $0.02 of earnings per share.
“Im proud of all that we achieved in 2010,” said Ron Sargent, Staples chairman and chief executive officer. “We got back to growing the top-line, achieved solid operating margin expansion and earnings growth, and generated over a billion dollars in free cash flow. While the fourth quarter was challenging primarily due to the impact of winter storms, sales have recovered in the first quarter of 2011. Our business is healthy, were investing in the right things, and our growth initiatives are gaining traction and positioning us well for a strong 2011.”
For the full year 2010, total company sales increased one percent to $24.5 billion compared to the full year 2009. Net income increased 19 percent year over year to $882 million, and diluted earnings per share, on a GAAP basis, increased 19 percent to $1.21 from the $1.02 achieved last year.
For the full year 2010, the company recorded $58 million of pre-tax integration and restructuring expense. Excluding this expense, as well as $84 million of pre-tax integration and restructuring expense and the $42 million settlement of several retail wage and hour class action lawsuits during the full year 2009, adjusted earnings per share, on a diluted basis, increased 11 percent to $1.27 from the $1.14 achieved last year.
Q4 2010 and Full Year 2010 Highlights
Total Company ? On a GAAP basis, fourth quarter of 2010 operating income rate increased 9 basis points
to 6.68 percent compared to the fourth quarter of 2009. Excluding the impact of the 2009 and 2010 special items discussed above, fourth quarter 2010 operating income rate declined 77 basis points to 6.78 percent. This decrease primarily reflects deleverage on lower sales due to inclement weather in North America, related increased promotional activity in North American Retail, and continued investments to support growth initiatives.
? On a GAAP basis, full year 2010 operating income rate increased 72 basis points to 6.41 percent compared to the full year 2009. Excluding the impact of the 2009 and 2010 special items discussed above, full year 2010 operating income rate increased 44 basis points to 6.65 percent compared to the full year 2009. This increase primarily reflects improvements in product margins and supply chain efficiencies, and lower depreciation and amortization expense. This was partially offset by investments in growth initiatives and the impact of inclement weather at the end of the fourth quarter.
? Generated free cash flow of $1.0 billion after $409 million in capital expenditures during 2010.
? Utilized strong free cash flow to repurchase 18.0 million shares for $367.4 million during 2010.
? Returned $259 million in cash dividends to shareholders during 2010. ? Ended the year with approximately $2.7 billion in liquidity, including $1.5 billion in
cash and cash equivalents and $1.2 billion of available lines of credit.
North American Delivery ? Achieved sales for the fourth quarter of 2010 of $2.5 billion, an increase of three
percent in US dollars, and an increase of two percent in local currency compared to the
fourth quarter of 2009. ? Achieved full year 2010 sales of $9.8 billion, an increase of two percent in US dollars,
and an increase of one percent in local currency, compared to the full year 2009. ? Fourth quarter 2010 operating income rate decreased 85 basis points to 8.31 percent
compared to the fourth quarter 2009. This decline primarily reflects higher incentive
compensation and investments in growth initiatives. ? Full year 2010 operating income rate increased 38 basis points to 8.54 percent
compared to the full year 2009. This improvement primarily reflects strength in the Contract business, improved product margins and reduced amortization expense, partially offset by investments to support growth initiatives.
North American Retail
? Achieved sales for the fourth quarter of 2010 of $2.6 billion, a slight decrease in US dollars and a decrease of one percent in local currency compared to the fourth quarter of 2009.
? Fourth quarter 2010 comparable store sales decreased two percent versus the fourth quarter of 2009, reflecting the negative impact of inclement weather, and softness in computers and peripherals, offset by strength in paper and services businesses.
? Achieved sales for the full year 2010 of $9.5 billion, an increase of two percent in US dollars and a slight decrease in local currency compared to the full year 2009.
? Full year 2010 comparable store sales decreased one percent versus the full year 2009. ? Fourth quarter 2010 operating income rate decreased 142 basis points to 8.13 percent compared to the fourth quarter of 2009. This decline primarily reflects deleverage on
lower sales due to winter storms and related promotional activity to drive sales. ? Full year 2010 operating income rate decreased 19 basis points to 8.08 percent
compared to the full year 2009, primarily due to lower sales caused by inclement weather and related promotional activity at the end of the fourth quarter, as well as investments in labor, partially offset by lower depreciation and marketing expense.
? Opened nine stores and closed six stores during the fourth quarter, and opened 41 stores and closed 12 stores during the full year, ending 2010 with 1,900 stores in North America.
International ? Achieved sales for the fourth quarter of 2010 of $1.4 billion, a decrease of three percent
in US dollars and flat in local currency compared to the fourth quarter of 2009. ? Achieved full year 2010 sales of $5.2 billion, a decrease of two percent in both US
dollars and in local currency compared to the full year 2009. ? Fourth quarter 2010 operating income rate increased eight basis points to 4.21 percent
compared to the fourth quarter 2009. This increase reflects improved profitability in
the European delivery businesses, offset by weakness in European Retail. ? Full year 2010 operating income rate increased 91 basis points to 3.22 percent
compared to the full year 2009. This increase primarily reflects improvement in supply
chain in the European delivery businesses and reduced amortization expense, partially
offset by deleverage in rent and labor costs in the European retail business. ? Opened one store in Germany and closed one store in Australia during the fourth
quarter 2010. The International business ended the year with 381 stores.
Outlook
The companys outlook assumes a continued modest improvement in the economy in 2011. For the first quarter of 2011, the company expects sales to increase in the low single-digits compared to the same period of 2010. The company expects to achieve diluted earnings per share, on a GAAP basis, in the range of $0.30 to $0.32 for the first quarter of 2011.
For the full year 2011, the company expects sales to increase in the low to mid single-digits compared to the full year 2010. The company expects to achieve diluted earnings per share, on a GAAP basis, in the range of $1.50 to $1.60 for the full year 2011. This earnings per share guidance assumes a number of non-operating items that are expected to benefit earnings per share growth by approximately $0.05 to $0.06 cents, including a lower share count due to share repurchases and a reduction in interest expense of approximately $20 million.
In 2011, the company expects capital expenditures to increase to $500 million for investments in growth initiatives, systems, the integration of distribution networks in North America and Europe, remodels, and new stores. The company expects to generate more than $1 billion of free cash flow in 2011.