Earnings: Staples | Heinz

Staples Beats Expectations

BOSTON -- (AP) -- Staples Inc. (SPLS) on Tuesday said its fourth quarter profit rose 15 percent, narrowly beating Wall Street expectations, as delivery sales at the nation's largest office products retailer continued to grow far faster than sales at stores.

Staples on Tuesday also raised its annual dividend by nearly a third, and said it expects a turnaround after recent lagging results in Europe.

Its shares rose 71 cents, or 3.1 percent, to $23.78 in morning trading on the Nasdaq Stock Market, approaching their 52-week high of $24.14.

The Framingham-based company reported net income of $290 million, or 39 cents per share, for the November-January period compared with a profit of $251 million, or 33 cents per share, in the same quarter a year earlier. Sales grew 9 percent to $4.46 billion, compared with $4.08 billion a year ago.

The most recent quarter's performance beat by a penny a share the consensus forecast of analysts surveyed by Thomson Financial, who expected a profit of 38 cents per share.

Staples said sales from its North American office products delivery business grew 18 percent in the fourth quarter, compared with 3 percent for its North American stores — in line with trends over the full year.

Staples' delivery operation now accounts for more a third of the company's revenue, and remains Staples' most profitable business despite rising shipping costs driven by higher fuel expenses.

International sales grew 9 percent, but overseas sales were flat when accounting for the weakening of the U.S. dollar against foreign currencies. Sales at stores in Europe open at least a year were up 3 percent, Staples' best performance by that measure since early 2003.

European sales have been slowed by the continent's slow economy and the costs of integrating some of Staples' new European operations, including difficulty selling off store properties shut down in Great Britain.

But Ron Sargent, Staples' chairman and chief executive officer, told analysts in a conference call that he expects "a nice turnaround for our European business" this year in part because of an improving economy and declining integration costs.

Staples continues to enjoy strong growth in sales to customers who buy office products on contract, with contract sales doubling since 2002. Staples' smaller rivals, Office Depot Inc. (ODP) and OfficeMax Inc. (OMX), also have seen contract business gains.

"It's a large market out there, and we're all taking some share from all the small, independent contract stationers out there," said Joseph Doody, head of Staples' delivery business.

Twenty-five of the 99 new stores Staples added in 2005 were in the Chicago area, a market where Staples expects to open another 15 stores this year. The 20-year-old chain now has 1,780 stores.

Staples, which began paying an annual dividend to shareholders in 2004, also said Tuesday its next payout will increase 32 percent to 22 cents per share, with the dividend payable April 20.

For the full fiscal year of 2005 — which ended Jan. 28 — Staples reported net income of $834 million, or $1.12 per share, up 18 percent from $708 million, or 93 cents per share, in the previous year. Sales rose 11 percent to $16.1 billion from $14.4 billion.

For this year's first quarter, Staples forecasts earnings per share to grow 15 percent to 20 percent — in line with analysts surveyed by Thomson Financial, who expect a per-share profit of 24 cents.

Staples expects full-year sales growth in the low double-digit range, with earnings per share rising 15 percent to 20 percent, also in line with analysts' expectations.

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Heinz Earning Fall

PITTSBURGH -- (AP) -- H.J. Heinz Co., (HNZ) one of the world's largest food producers, said on Tuesday that its fiscal third-quarter earnings fell 24 percent because of high costs related to downsizing and divestitures.

Quarterly net income fell to $116.6 million, or 35 cents per share, for the three months ended Jan. 25 from $152.4 million, or 43 cents per share, in the year-ago quarter. Revenue rose 6 percent to $2.19 billion from $2.07 billion the previous year.

Earnings from continuing operations totaled 39 cents per share. Earnings from continuing operations, excluding reorganization, impairment costs and other items, was 50 cents per share.

Heinz said special items in the third quarter for downsizing, integration, separation and preparation for sale totaled $27.9 million. The company also recorded a loss of $19.5 million related to potential sales.

In addition to its flagship ketchup brand, Heinz owns Ore-Ida french fries, Boston Market and Smart Ones prepared meals and assorted Heinz sauces, soups and beans.

For fiscal 2007, Heinz is projecting sales growth of 3 percent to 4 percent and earnings growth also of 6 percent to 8 percent from a range of $2.10 to $2.16 per share anticipated for fiscal 2006.

Heinz shares rose 6 cents to $37.66 in early trading on the New York Stock Exchange.

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