BUSINESS
08/20/2014 09:10 am ET | Updated Oct 20, 2014

Staples Is Closing A Ton Of Stores

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Aug 20 (Reuters) - Staples Inc reported better-than-expected quarterly profit and sales, driven by strong demand for non-core office supplies, such as furniture and breakroom items, from companies in North America.

Shares of the largest U.S. office supply retailer rose 3 percent before the bell.

Staples has been spending heavily on advertising to promote itself as a seller of products other than traditional office supplies such as ink, toner and paper products.

Sales in its North America commercial business, under which it sells items such as breakroom supplies, furniture, technology and print products to offices, rose 3 percent in the second quarter - the fastest growth in three years.

The business accounted for about 38 percent of Staples' total sales in the quarter.

" ... We saw particular strength in facilities and breakroom supplies, which was up in the double digits, as well as print and furniture, which both grew in the high single digits," Chief Executive Ron Sargent said on a conference call.

The company has also been investing to boost its online business, which grew 8 percent in the quarter.

"This reflects growth from the company's expanded assortment in categories beyond office supplies, as well as increased business customer acquisition and conversion," Staples said in a statement.

The company, facing stiff competition from mass merchants such as Wal-Mart Stores Inc and online retailers such as Amazon.com Inc, said in March it would close 140 of its underperforming North America stores this year.

Staples said on Wednesday it closed 80 of these stores in the second quarter ended Aug. 2.

Staples, however, warned that its sales could fall in the current quarter as it sells fewer computers and core office supplies in North America.

Core office supplies accounted for 27.5 percent of its total sales in the year ended February.

Earlier this month, smaller rival Office Depot Inc warned of weak sales this year as it struggles to arrest a decline in sales in its North American retail business.

Staples forecast a profit of 34-39 cents per share for the third quarter ending November.

Analysts on average were expecting 37 cents per share, according to Thomson Reuters I/B/E/S.

Staples' net income fell 20 percent to $81.9 million, or 13 cents per share, in the second quarter. Excluding items, the company earned 12 cents per share.

Total sales fell 1.8 percent to $5.22 billion.

Analysts on average had expected a profit of 11 cents per share and revenue of $5.16 billion.

North America same-store sales, excluding Staples.com, fell 5 percent.

Staples shares were trading at $11.94 before the bell.

Up to Tuesday's close of $11.62 on the Nasdaq, the stock had fallen by more than a quarter this year. (Reporting by Devika Krishna Kumar in Bangalore; Editing by Kirti Pandey)