Staples Inc. Income Drops 31%, Company Cuts Outlook

Net income for Staples Inc., Framingham, Mass., took a significant hit in the second quarter of 2012. The office supply retailer and parent company to Staples Advantage and Staples Promotional Products this week reported that earnings fell 31.8 percent for the period ended July 28, 2012, a result of a slowdown in U.S. retail sales and difficulties in international markets.

The company earned $120.4 million for the quarter this year, compared with $176.4 million for the same period in 2011. Last year's income numbers were bolstered by a $21 million tax refund. Total company sales dropped six percent, to $5.5 billion.

Staples North American Delivery division, which includes Staples Advantage and Staples Promotional Products, reported a 1 percent decrease in sales for the period, $2.41 billion compared to $2.43 billion. The company attributed this to the loss of two large contract customers, but said this was offset by "growth in facilities and breakroom supplies and promotional products," implying that distributor Staples Promotional Products business remained healthy. The company does not report figures for Staples Advantage or Staples Promotional Products separate from North American Delivery.

Although sales for North American Delivery were down for the quarter, they remain up for the year. Six-month figures place sales at $4.96 billion for 2012, compared to $4.94 billion last year. North American Delivery reported a 2 percent increase in sales for the first quarter of the year.

North American Retail, the company's second largest division, showed a 3 percent decrease in sales at $2 billion for the quarter, while the International Operations unit took the strongest hit this period. Overseas sales decreased 18 percent to $1.1 billion, attributed to weak sales in Australia and continuing difficulties in several European economies. Analysts had anticipated sales in Europe to drop, a trend affecting nearly all industries globally.