Staples, Inc. Reports Record First Quarter Performance; Earnings Per Share Rose 25 Percent and Company Sales Increased Nine Percent

First quarter North American Retail comparable sales increased onepercent versus 2005, reflecting positive customer traffic and strongcomps in core supplies categories and copy and print services, offsetby weaker performance in furniture and technology. Total NorthAmerican Retail sales grew seven percent. North American Deliverycontinued its strong growth, increasing sales 17 percent versus lastyear. International sales rose six percent in local currency, butdeclined one percent in US dollars due to a $40 million negativeforeign exchange impact.

"We're off to a great start in 2006, posting strong results in thefirst quarter," said Ron Sargent, Staples' chairman and chiefexecutive officer. "Our associates continue to deliver the numbers andprovide an easy customer shopping experience. As Staples celebratesits 20th anniversary this month, we are very proud of what we'veaccomplished, but even more excited about what lies ahead."

Highlights for the first quarter include:

-- Total company operating income improved 79 basis points year over year to 6.7 percent, with all business units growing profits much faster than sales.

-- North American Retail operating margins were 7.8 percent, up 63 basis points versus 2005, reflecting strong gross margin comps due to improved product mix, with strength in supplies and services.

-- North American Delivery continues its momentum, with strong sales growth across all product categories, improving customer satisfaction scores, and a 64 basis point improvement in operating profit to 9.4 percent.

-- Profits tripled in International this quarter, with operating margins of 1.9 percent, an increase of 129 basis points versus last year, reflecting early progress in the company's European turnaround.

-- Inventory turns rose 15 basis points to 5.80 times.

-- Staples opened two new stores in the United States, three stores in Canada, and one store in Portugal. The company now operates 1,786 stores worldwide.

-- The company generated $54 million in free cash flow during the first quarter of the year after $115 million in capital expenditures.

Outlook

For the second quarter of 2006, Staples anticipates lowdouble-digit sales growth for the total company and expects earningsper share to grow 15 to 20 percent. Given the upside achieved in thefirst quarter, for the full year, the company expects to be at thehigh end of the range of its previously stated earnings guidance of 15to 20 percent. Earnings growth expectations for the second quarter andfull year 2006 refer to 2005 earnings restated to include the impactof stock compensation expense under the Financial Accounting StandardsBoard's statement 123R, which the company implemented as of January29, 2006. Pro forma restated financial statements are available on the"Financial Measures" section of the investor relations website onwww.staples.com. The company's earnings outlook also reflects theimpact of a 53rd week in fiscal 2006.

About Staples

Staples, Inc. invented the office superstore concept in 1986 andtoday is the world's largest office products company. With 69,000talented associates, the company is committed to making it easy to buya wide range of office products, including supplies, technology,furniture, and business services. With 2005 sales of $16.1 billion,Staples serves consumers and businesses ranging from home-basedbusinesses to Fortune 500 companies in 21 countries throughout Northand South America, Europe and Asia. Headquartered outside of Boston,Staples operates 1,786 office superstores and also serves itscustomers through mail order catalog, e-commerce and contractbusinesses. More information is available at www.staples.com.

Certain information contained in this news release constitutesforward-looking statements for purposes of the safe harbor provisionsof The Private Securities Litigation Reform Act of 1995 including, butnot limited to, the information set forth under the heading "Outlook"and other statements regarding our future business and financialperformance. Actual results may differ materially from those indicatedby such forward-looking statements as a result of risks anduncertainties, including but not limited to: our market is highlycompetitive and we may not continue to compete successfully; we may beunable to continue to open new stores and enter new marketssuccessfully; our growth may continue to strain operations, whichcould adversely affect our business and financial results; ouroperating results may be impacted by changes in the economy thatimpact business and consumer spending; our business and financialperformance is dependent upon our ability to attract and retainqualified associates; our stock price may fluctuate based on marketexpectations; our quarterly operating results are subject tosignificant fluctuation and are impacted by the extent to which salesin new stores result in the loss of sales in existing stores, the mixof products sold, pricing actions of competitors, the level ofadvertising and promotional expenses, extreme weather-relateddisruptions and seasonality; our expanding international operationsexpose us to the unique risks inherent in foreign operations; ourbusiness may be adversely affected by the actions of and risksassociated with our third-party vendors; our expanded offering ofproprietary branded products may not improve our financial performanceand may expose us to product liability claims; our debt level andoperating lease commitments could impact our ability to obtain futurefinancing and continue our growth strategy; a California wage and hourclass action lawsuit may adversely affect our business and financialperformance; and those other factors discussed or referenced in ourquarterly report on Form 10-Q for the quarter ended April 29, 2006,under the heading "Risk Factors" and elsewhere, and any subsequentperiodic reports filed by us with the SEC. In addition, anyforward-looking statements represent our estimates only as of todayand should not be relied upon as representing our estimates as of anysubsequent date. While we may elect to update forward-lookingstatements at some point in the future, we specifically disclaim anyobligation to do so, even if our estimates change.

Financial information follows.
STAPLES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollar Amounts in Thousands, Except Share Data)


April 29, Restated
2006 January 28,
(Unaudited) 2006
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $875,112 $977,822
Short-term investments 498,304 593,082
Receivables, net 606,554 576,672
Merchandise inventories, net 1,751,349 1,706,372
Deferred income tax asset 149,013 149,257
Prepaid expenses and other current assets 145,954 141,339
----------- -----------
Total current assets 4,026,286 4,144,544

Property and equipment:
Land and buildings 740,794 705,978
Leasehold improvements 900,648 884,853
Equipment 1,382,387 1,330,181
Furniture and fixtures 691,122 672,931
----------- -----------
Total property and equipment 3,714,951 3,593,943
Less accumulated depreciation and
amortization 1,911,841 1,835,549
----------- -----------
Net property and equipment 1,803,110 1,758,394

Lease acquisition costs, net of accumulated
amortization 34,358 34,885
Intangible assets, net of accumulated
amortization 230,573 240,395
Goodwill 1,378,752 1,378,752
Other assets 184,007 175,750
----------- -----------
Total assets $7,657,086 $7,732,720
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,438,500 $1,435,815
Accrued expenses and other current
liabilities 965,674 1,041,201
Debt maturing within one year 2,221 2,891
----------- -----------
Total current liabilities 2,406,395 2,479,907

Long-term debt 516,470 527,606
Deferred income tax liability 6,286 5,845
Other long-term obligations 259,577 233,426
Minority interest 4,083 4,335

Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized; no shares issued - -
Common stock, $.0006 par value,
2,100,000,000 shares authorized; issued
834,444,525 shares at April 29, 2006 and
829,695,100 shares at January 28, 2006 501 498
Additional paid-in capital 3,041,514 2,937,362
Cumulative foreign currency translation
adjustments 108,542 87,085
Retained earnings 3,218,214 3,192,630
Less: Treasury stock at cost - 106,130,705
shares at April 29, 2006, and 99,253,565
shares at January 28, 2006 (1,904,496) (1,735,974)
----------- -----------
Total stockholders' equity 4,464,275 4,481,601
----------- -----------
Total liabilities and stockholders'
equity $7,657,086 $7,732,720
=========== ===========




STAPLES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data)
(Unaudited)

13 Weeks Ended
-------------------------
Restated
April 29, April 30,
2006 2005
------------ ------------

Sales $4,237,646 $3,899,052
Cost of goods sold and occupancy costs 3,048,649 2,837,200
------------ ------------
Gross profit 1,188,997 1,061,852

Operating and other expenses:
Operating and selling 716,157 652,421
General and administrative 183,723 173,583
Amortization of intangibles 3,203 3,402
------------ ------------
Total operating expenses 903,083 829,406
------------ ------------

Operating income 285,914 232,446

Other income (expense):
Interest income 19,517 10,950
Interest expense (14,656) (9,988)
Miscellaneous expense (428) (621)
------------- ------------
Income before income taxes and minority
interest 290,347 232,787
Income tax expense 104,525 84,967
------------ ------------
Income before minority interest 185,822 147,820
Minority interest (252) 78
------------ ------------
Net income $186,074 $147,742
============ ============


Earnings Per Share:

Basic earnings per common share $0.26 $0.20
============ ============

Diluted earnings per common share $0.25 $0.20
============ ============

Dividends declared per common share $0.22 $0.17
============ ============


Weighted average shares outstanding:

Basic 725,767,271 737,158,410
Diluted 744,303,611 755,861,932





STAPLES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
(Unaudited)

13 Weeks Ended
-----------------------
Restated
April 29, April 30,
2006 2005
----------- -----------
Operating Activities:
Net income $186,074 $147,742
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 79,704 73,185
Stock-based compensation 34,962 30,352
Deferred tax expense (benefit) 882 (4,738)
Excess tax benefits from stock-based
compensation arrangements (14,856) (6,100)
Other 1,777 1,743
Changes in assets and liabilities:
Increase in receivables (27,152) (36,585)
(Increase) decrease in merchandise
inventories (35,451) 38,029
(Increase) decrease in prepaid expenses
and other assets (8,863) 655
Decrease in accounts payable (4,460) (27,617)
Decrease in accrued expenses and other
liabilities (53,256) (70,438)
Increase in other long-term obligations 8,954 11,337
----------- -----------
Net cash provided by operating activities 168,315 157,565

Investing Activities:
Acquisition of property and equipment (114,557) (63,448)
Increase in investment, net of cash acquired - (3,872)
Purchase of short-term investments (2,257,198) (1,824,115)
Proceeds from the sale of short-term
investments 2,351,975 1,840,227
----------- -----------
Net cash used in investing activities (19,780) (51,208)

Financing Activities:

Proceeds from the exercise of stock options
and the sale of stock under employee stock
purchase plans 55,141 24,693
Payments on borrowings (1,487) (637)
Cash dividends paid (160,490) (122,916)
Excess tax benefits from stock-based
compensation arrangements 14,856 6,100
Purchase of treasury stock, net (168,522) (191,692)
----------- -----------
Net cash used in financing activities (260,502) (284,452)

Effect of exchange rate changes on cash and
cash equivalents 9,257 (3,035)

Net decrease in cash and cash equivalents (102,710) (181,130)
Cash and cash equivalents at beginning of
period 977,822 997,310
----------- -----------
Cash and cash equivalents at end of period $875,112 $816,180
=========== ===========




STAPLES, INC. AND SUBSIDIARIES
Segment Reporting
(Dollar Amounts in Thousands)


(Unaudited)
13 Weeks Ended
-----------------------
Restated
April 29, April 30,
2006 2005
----------- -----------

Sales:
North American Retail $2,311,600 $2,166,623
North American Delivery 1,381,551 1,183,316
International Operations 544,495 549,113
----------- -----------
Total sales $4,237,646 $3,899,052
=========== ===========

Business Unit Income:
North American Retail $180,237 $155,338
North American Delivery 130,119 103,920
International Operations 10,520 3,540
----------- -----------
Total business unit income $320,876 $262,798
Stock-based compensation (34,962) (30,352)
----------- -----------
Total reportable segments 285,914 232,446
Interest and other income, net 4,433 341
----------- -----------
Income before income taxes and minority
interest $290,347 $232,787
=========== ===========