Staples, Inc. Announces First Quarter Performance

Staples, Inc. (Nasdaq: SPLS) announced today the results for its first quarter ended May 3, 2008. Total company sales increased six percent to $4.9 billion compared to the first quarter of 2007. Net income rose two percent year over year to $212 million, and earnings per share, on a diluted basis, increased three percent to $0.30, from the $0.29 achieved in the first quarter of last year. North American Retail sales grew two percent in the first quarter, and comparable store sales decreased six percent versus 2007, reflecting declines in customer traffic and average order size. North American Delivery continued its industry-leading growth, increasing sales eight percent versus last year’s first quarter. Total International sales increased 19 percent in US dollars, benefiting from a $72 million foreign currency impact, and increased eight percent in local currency. International comparable store sales increased four percent versus 2007. "We are pleased to deliver solid results in a challenging quarter,” said Ron Sargent, Staples’ chairman and chief executive officer. "We continue to gain share while we invest in growth ideas to strengthen our market position.” Highlights for the first quarter include: Total Company Achieved record first quarter sales of $4.9 billion. Operating income rate declined 44 basis points to 6.59 percent, reflecting operating expense deleverage offset by a modest improvement in gross profit rate. Opened 38 new stores worldwide, ending the first quarter operating 2,076 stores. Generated first quarter free cash flow of $225 million after $74 million in capital expenditures, compared to free cash flow of $115 million for the same period last year. Repurchased 2.8 million shares of stock for $65 million during the first quarter and spent $231 million to pay its annual cash dividend. North American Retail Achieved record first quarter sales of $2.4 billion. Achieved all-time high customer satisfaction scores. Opened 35 new stores, ending the first quarter with 1,773 stores in North America. Reported a 103 basis point decline in operating income rate to 6.99 percent versus 2007, reflecting deleverage in rent and operating expense despite tight expense control and increased product margin rate. Reduced average inventory per store by five percent. North American Delivery Achieved record first quarter sales of $1.7 billion, reflecting continued success in Contract account acquisition and share of wallet initiatives throughout North American Delivery, including Staples Promotional Products, Staples Industrial, and copy and print services. Reported a 4 basis point decline in operating income rate to 9.49 percent versus 2007, reflecting improvement in our supply chain and product margin rate more than offset by investment in growth initiatives. International Achieved record first quarter sales of $756 million, reflecting mid-teens growth in US dollars in Europe. European Retail comparable store sales rose four percent, led by double-digit comparable stores sales in the UK. Sustained momentum in China with sales nearly doubling versus the prior year’s first quarter. Drove continued profit improvement with operating income rate up 71 basis points year over year to 3.15 percent. Opened two stores in the UK and one store in Belgium, ending the first quarter with 271 stores in Europe and 32 stores in China. Outlook The company expects the weak economic climate to continue throughout 2008. Based on this expectation, and continued investment in growth initiatives, the company’s previous full year outlook remains unchanged. The company expects to achieve mid single-digit sales growth and high single-digit earnings per share growth for 2008, excluding the previously disclosed impact to 2007 earnings for the $38 million pre-tax charge ($24 million after-tax or $0.04 per diluted share) related to the settlement of California wage and hour class action litigation. The company expects flat earnings per share growth for the second quarter. The company’s guidance for future periods excludes any potential impact relating to its previously announced proposal to acquire all of the outstanding capital stock of Corporate Express N.V. About Staples Staples, Inc. invented the office superstore concept in 1986 and today is the world's largest office products company. With 76,000 talented associates, the company is committed to making it easy to buy a wide range of office products, including supplies, technology, furniture, and business services. With 2007 sales of $19.4 billion, Staples serves consumers and businesses ranging from home-based businesses to Fortune 500 companies in 22 countries throughout North and South America, Europe and Asia. Headquartered outside of Boston, Staples operates more than 2,000 office superstores and also serves its customers through mail order catalog, e-commerce and contract businesses. More information is available at www.staples.com. Staples in Europe In Europe, Staples operates through 2 major distribution channels : Staples superstores and the delivery business with Staples Europe Catalogue. Staples employs near 9 000 people in 16 countries. Staples in Europe operate strong brands Strong European Brands Staples European Retail operates with Staples Brand in UK, Germany and Portugal, with Office Centre in the Netherlands and Belgium Staples Europe Catalogue operates with several brands: JPG and Bernard in France, Belgium and Luxembourg, Mondoffice in Italy, STAPLES and Neat-ideas in Great Britain, STAPLES and Pressel in Germany, Pressel in France, Belgium and Switzerland, Kalamazoo in Spain and Quill Kontorslagret in Sweden , Pressel Quill in Austria, in The Czech Republic, in Hungary, Malling Beck in Denmark, Pressel in the Netherlands Certain information contained in this news release constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995 including, but not limited to, the information set forth under the heading "Outlook” and other statements regarding our future business and financial performance. Actual results may differ materially from those indicated by such forward-looking statements as a result of risks and uncertainties, including but not limited to: our market is highly competitive and we may not continue to compete successfully; economic conditions may cause a decline in business and consumer spending; we may be unable to continue to open new stores and enter new markets successfully; our growth may strain our operations; we may not consummate our proposed acquisition of Corporate Express N.V. or realize any benefits if we do complete the acquisition; we may be unable to attract and retain qualified associates; our quarterly operating results are subject to significant fluctuation; our expanding international operations expose us to the unique risks inherent in foreign operations; our business may be adversely affected by the actions of and risks associated with our third party vendors; our expanded offering of proprietary branded products may not improve our financial performance and may expose us to intellectual property and product liability claims; our debt level and operating lease commitments may impact our ability to obtain future financing and continue our growth strategy; our effective tax rate may fluctuate; our information security may be compromised; various legal proceedings may adversely affect our business and financial performance; and those other factors discussed or referenced in our most recent annual report on Form 10-K filed with the SEC, under the heading "Risk Factors” and elsewhere, and any subsequent periodic or current reports filed by us with the SEC. In addition, any forward-looking statements represent our estimates only as of the date of this release and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.