A retail rebound seen at Staples

Staples' North American retail division eked out a 1% sales increase during its third quarter thanks to strength in such categories as computers, ink and toner. Retail sales totaled $2.6 billion, and although same-store sales were flat and operating margins declined slightly to 10.11%, the company indicated that for the first time nine quarter customer traffic increased. That was enough for CEO Ron Sargent to include the retail business in optimistic comments about the company’s performance.

“With North American Retail growing again, improving trends in our catalog businesses, solid profitability in our European office products portfolio, and record free cash flow, we’re increasingly optimistic about the future,” Sargent said.

Total company sales in the third quarter ended Oct. 31 decreased 6% to $6.5 billion compared to third-quarter 2008 sales of $7 billion. However, net income increased 72% to $269 million, and diluted earnings per share increased 68% to 37 cents, from the 22  cents achieved in the third quarter of last year.

The company also indicated that it generated record year to date free cash flow of $1.4 billion after $191 million in capital expenditures, compared to free cash flow of $921 million for the same period of 2008.