NEW YORK – Costs related to Staples turnaround plan helped drive down the office supplier’s fourth-quarter net income by 72 percent. Its quarterly revenue and financial outlook for the year missed Wall Street’s expectations.
Staples, which has 1,547 stores in the U.S. and 339 stores in Canada, is the largest office supply retailer, a sector hit hard by the recession and slow to recover.
Its earnings report comes two weeks after Office Depot Inc. and OfficeMax said they would combine to better compete against their larger rival as well as Internet retailers like Amazon.com and discounters such as Wal-Mart Stores Inc.
Last year Staples launched a strategic plan that includes investing more in its online and mobile efforts, adding more products beyond office supplies, and beefing up its services business.
One example of expanding beyond office supplies — CEO Ron Sargent said the chain will now carry accessories for Apple products like the iPhone and iPad.
“We are gaining momentum in each of these areas and at the same time, we are taking action to reshape our business to fund the future while building on our core strengths to better serve our customers,” Sargent said in a call with investors.
Citi Investment Research analyst Kate McShane, who upgraded the stock after Office Depot and OfficeMax announced their intent to combine on the belief that the merger would lead to store closings that would benefit Staples’ stores, reiterated her “Neutral” rating on the stock.
The analyst said the office supply industry as a whole faces major challenges like declines in paper products, the trend toward lower-margin technology products, a weak economy in Europe, and intensifying competition from online retailers.
For the period ended Feb. 2, Staples earned $78.1 million, or 12 cents per share, down from $283.6 million, or 41 cents per share, a year earlier.
Excluding charges tied to stores closings and other items, earnings from continuing operations came to 46 cents per share. That was a penny above analysts’ average expectations, according to a FactSet survey.
Revenue rose 3 percent to $6.57 billion from $6.37 billion, but that missed analyst expectations of $6.71 billion, despite an extra week in the quarter compared with last year.
Sales for the North American stores and online segment — which includes retail stores and its online businesses in the U.S. and Canada — rose 3 percent mostly because of the extra week of sales. Better sales of tablets, e-readers, facilities and break-room supplies and copy and print services was somewhat offset by lower sales of computers, digital cameras and software.
Revenue at stores open at least a year fell 5 percent due to weaker traffic and a flat average order size. The results do not include online sales.
For the North American commercial unit, sales rose 7 percent primarily because of the extra week but also because of increased sales of facilities and break-room supplies.
The division includes contract operations in the U.S. and Canada and Staples Quill.com business.
International sales dropped 4 percent because of softness in Australia and Europe.
Staples lost $210.7 million, or 31 cents per share, for the full year. In the prior year it reported net income of $984.7 million, or $1.40 per share.
Annual revenue edged down 1 percent to $24.38 billion from $24.66 billion.
The Framingham, Mass., company anticipates 2013 earnings between $1.30 and $1.35 per share. Revenue is expected to rise by a low single-digit percentage rate compared with 2012’s consolidated sales of $23.92 billion. Analysts expect $1.44 per share on $24.33 billion in revenue.
Staples also said Wednesday that it is increasing its quarterly dividend by 9 percent.to 12 cents per share from 11 cents per share. The dividend will be paid on April 18 to shareholders of record on March 29.
Its shares fell 89 cents, or 6.7 percent, to $12.39 in morning trading. Its shares are down 27 percent from their 52-week high of $16.93 last March. They fell as low as $10.57 in late August.