Staples offers FTC justification for Office Depot acquisition

Another set of weak quarterly results from Staples and another round of store closures could give the Federal Trade Commission more evidence to support Staples long-running effort to acquire Office Depot.



Staples said its total sales for the fourth quarter ended Jan. 30, declined 7% to $5.3 billion with each of its three divisions (North American Stores and Online, North American Commercial, International) posting declines. The sales decline was a less extreme 2% if the effects of foreign exchange and the closure of 73 stores throughout 2015 are excluded. Staples has closed 242 stores the past two years and plans to close another 60 locations this year. Same store sales in the quarter declined 4%. The profit picture looked better than the sales performance and was aided by improved product margins in the North American Store and Online division and what was described as, “aggressive cost management.”



Staples reported a profit of $86 million, or 13 cents a share, compared to a prior year loss of $260 million, or 41 cents a share. Excluding a $172 million fourth quarter charge related to restructuring and Office Depot acquisition expenses, adjusted profits for the fourth quarter of 2015 were $168 million, or 26 cents a share.



"In 2015, our top priority was to stabilize total company sales and earnings after a few years of heavy investment to transform Staples," said Ron Sargent, Staples' chairman and CEO. "While our Q4 results came in at the lower end of our expectations, we continued to make good progress on many of our key initiatives, and we have a solid plan to get back to earnings growth in 2016."



Although staples said it expects sale to decline again in the first quarter, adjusted earnings per share are forecast to range from 16 cents to 18 cents. Staples cautioned that figure excludes any potential costs related to the company's planned acquisition of Office Depot and the impact related to ongoing store closures.



Office Depot and Staples entered into a merger agreement on Feb. 4, 2015, but last December the Federal Trade Commission said it planned to block the merger. Staples and Office Depot they intended to contest that decision. The matter will come to a head on March 21 when a hearing begins on the FTC’s preliminary injunction with a decision expected by May 10.