August 04, 2020

Staples reports higher profits, raises outlook

BOSTON – Shares of Staples Inc. surged 11 percent Tuesday after the office supply chain beat second-quarter expectations, raised its outlook and provided good news for the broader economy by signaling that its bread-and-butter small-business customers were spending again.

Framingham-based Staples reported profits of $87.8 million, or 18 cents per share, up 47 percent from $59.6 million, or 13 cents per share, a year ago. Analysts surveyed by Thomson First Call expected 16 cents per share.

The company also said it expected to earn $1.09 per share this year, compared with the Wall Street consensus of $1.05.

Total sales rose 18 percent to $2.87 billion. Comparable store sales, a measurement of performance at stores that were also open a year ago, were up 6 percent, after falling 1 percent in the same quarter a year ago, and the company reported record operating margins.

Last year Staples reported $11.6 billion in sales, which edged it past Office Depot and gave it at least a temporary claim as the No. 1 office supply chain.

Staples shares jumped $2.15 to close at $22.53 on the New York Stock Exchange.

Chief executive Ron Sargent in a telephone interview said the company’s sales mix jibed with other data showing a pick-up in the economy. Sales of durable goods, which were down a year ago, rose 4 percent.

“We’re seeing it not only in the core office supply categories … but we’re also starting to see it in some of the more capital goods purchases, things like business machines and furniture,” he said. “Given that mix is going up in our business, it’s probably an indication of a more bullish kind of environment for that small-business customer who is our bread and butter.”

Small businesses and individuals who spend more than $500 per year on office supplies account for 70 percent of sales and 90 percent of profits, Sargent told the AP in an interview earlier this year.

“I thought they did a great job, executed, and it looks like we’re beginning to see some improving demand in the office product space,” said Colin McGranahan, an analyst at Bernstein.

For the first six months of the year, Staples earned $112.5 million, or 23 cents per share, down from $153.4 million, or 32 cents per share, a year ago.

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