Staples Reports Profit, Sales Decline

Staples Inc., which is awaiting regulatory approval for its acquisition of rival Office Depot Inc., on Wednesday said profit slipped in its latest quarter as sales remained under pressure.

The Framingham, Mass., company in February bid $6.3 billion to buy its smaller rival. Amid concerns that the proposed tie-up would leave few competitive options for large businesses that buy office supplies in bulk, the Federal Trade Commission has spent about 10 months scrutinizing the deal.

The companies have reportedly offered to transfer a chunk of their large corporate contracts to wholesaler Essendant Inc. to allay antitrust worries, on top of the $1.25 billion of annual Office Depot business Staples has agreed to divest.

The proposed transaction—which would result in combined sales of about $40 billion—comes as the retailers face dwindling sales amid growing online competition from retailers like Amazon.com Inc.

Staples warned in August that it would report lower sales in the third quarter, which covers much of the back-to-school sales season.

On Wednesday, the company said it expected another sales decline in the fourth quarter.

During the most recent period, sales fell 6.2% from a year earlier, with comparable-store sales in North America down 2% on lower traffic and total international sales 17% lower than the year-ago quarter.

Store closures shaved about 3% from the top line, and a stronger dollar took off another 4%, Staples said in a news release.

In all, Staples reported a profit of $198 million, or 31 cents a share, down from $216.8 million, or 34 cents a share, a year earlier. Excluding merger and restructuring costs, earnings per share fell to 35 cents from 37 cents.

Revenue decreased 6.2% to $5.59 billion.

Analysts projected 35 cents in adjusted per-share profit on $5.66 billion in sales, according to Thomson Reuters.

For the current quarter, the company said it expects to report adjusted earnings per share of 26 cents to 30 cents, bracketing the average analyst estimate of 28 cents. The company didn't indicate by how much sales would fall in the fourth quarter.

Under a current timing agreement between the FTC and the two companies, the commission is scheduled to render a decision on the merger by Dec. 8, though that date could be pushed back. Antitrust regulators in Europe have meanwhile amped up their probe and in September extended their decision deadline until early March.

Amid concerns that the deal won't pass muster, Staples shares have dropped 31% this year while Office Depot's stock has fallen 15% and is trading at a sharp discount to the deal price.

In premarket trading, Staples shares declined 3% to $12.07.

Write to Lisa Beilfuss at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

November 18, 2015 08:05 ET (13:05 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.