Staples Sees Jump in Earnings, But Fails to Meet Sales Expectations

Staples Inc. saw its third-quarter earnings jump 13 percent as the company implemented effective cost-consolidating methods, but overall sales growth did not meet expectations due to sluggish spots in Europe and Australia.

Staples, the largest office supply store in the United States, released its third-quarter earnings Tuesday and said it had netted an income of $326 million, or 47 cents per share. That marked an increase from $288.7 million, or 40 cents per share, over the same period a year ago.

Revenue was also slightly improved, as the company sold $6.6 billion worth of supplies over the three months ending Oct. 29 compared with $6.5 billion last year.

We continue to make progress managing the business in a pretty tough environment, and our cash flows remain very strong, Staples CEO Ronald Sargent said in a conference call with investors Tuesday morning.

Still, slow sales in Europe and Australia tempered excitement. Staples' revenue didn't meet analysts' estimates, as they were polled before the report by Thomson Reuters. They had forecasted revenues of $6.72 billion.

Staples' international revenue slipped nearly two percent to $1.3 billion in U.S. dollars. In local currency, that decline was even steeper at 7 percent. The reason was that business trends in Europe and Australia were softer than expected, Sargent said.

In international, the progress we've made to streamline our cost structure was more than offset by lower-than-expected sales, he said. In total, we had a solid quarter with strong performance in North America and in our growth initiatives, and soft performance in international, driven by weak sales.

Sargent said sales in North American delivery were up two percent in the third quarter to $2.6 billion, the seventh consecutive quarter of growth. The company posted strong numbers in sales of computers, technology peripherals and copy and print, but paper was down.

As for the holiday shopping season, Staples plans to have more new products available for purchase, including Amazon's Kindle Fire, Barnes & Noble's Nook tablet and Keurig coffee makers. The company is now selling Apple products in Canada, including the iPad 2.

Looking ahead to the fourth quarter, which includes the holiday season, the company said it is forecasting flat or low single-digit growth in sales.

Off the earnings report, shares of Staples dropped 3.12 percent to 14.90 as of 2:45 p.m. ET.