BOSTON – Staples Inc. said Tuesday its third-quarter profit grew 14 percent as gains in the office products seller's delivery business and copying services offset slow sales overseas.
But the profit increase fell short of Staples' gains in previous quarters, sending the company's shares down about 4.5 percent in morning trading.
Framingham-based Staples reported net income for the three-month period ending Oct. 29 of $237.8 million, or 32 cents per share, compared with $208.9 million, or 28 cents per share, in last year's third quarter. Sales rose 11 percent to $4.25 billion from $3.83 billion a year ago.
The most recent quarter's per-share profit matched the consensus forecast of analysts surveyed by Thomson Financial.
Shares of Staples fell $1.97 cents to $22.79 in morning trading on the Nasdaq Stock Market.
The 14 percent profit gain fell short of Staples' performances in recent years, including a string of 12 straight quarters ending with last year's fourth quarter in which it posted earnings increases of at least 20 percent.
"Investors have been conditioned for Staples to beat earnings estimates and record pretty strong profit margins," said analyst Anthony Chukumba of Morningstar Inc.
Sales at North American retail stores open at least a year increased 3 percent, driven by growth in copying services that Staples pitched in a recent advertising campaign. Staples also cited growing sales of digital cameras and portable computers, and a strong startup in Chicago, one of several new markets.
Staples' North American delivery business grew 18 percent in the third quarter to nearly $1.29 billion, about a third of the company's revenue. The increase followed a 17 percent gain in the previous quarter's delivery business, an area in which Staples expects to invest further.
"It's still under-penetrated, with significant market expansion potential ahead," Ron Sargent, Staples' chairman and chief executive, told analysts in a conference call.
Staples reported a 2 percent decline in international sales in the most recent quarter, excluding benefits from acquisitions and a negative impact from fluctuating currency exchange rates.
Sargent said Europe's slow economy and the costs of integrating some of Staples' new European operations have weighed on overseas sales.
"With many of these investments behind us, we are seeing improving trends," Sargent said.
Chukumba, the Morningstar analyst, said, "The international business just continues to struggle, and I think investors are a little surprised they haven't been able to turn this around sooner."
The 20-year-old company is now in 21 countries, with Staples' recent acquisitions focusing on growth in Europe and China.
The 65,000-employee company, whose chief domestic rivals are Office Depot Inc. and OfficeMax Inc., operates 1,748 retail stores and offers office products via catalog, online and contract sales.
Staples expects a fourth-quarter profit in line with analysts' expectations of 38 cents per share, or growth of 19 percent. Staples also reiterated its fiscal 2006 forecast for per-share earnings growth of 15 percent to 20 percent.
The company's estimate includes a 53rd week next fiscal year and stock option expenses, which companies must begin recording under a revised accounting rule. Analysts have forecast earnings of $1.26 per share for the year ending in January 2007.
Staples last month announced plans to buy back $1.5 billion of its common stock once an existing $1 billion repurchase program is finished later this year.