Paper Prices Lift 2nd-Quarter Sales at Staples Stores

Staples Inc. said fiscal second-quarter sales at stores open at least a year are expected to be slightly higher than in the first quarter, in part because of higher paper prices.

The price of paper this quarter was about 15% to 20% lower than in the same period a year ago. Paper prices during the first quarter ended May 3, though, were about 30% lower, said John Mahoney, Staples chief financial officer and executive vice president, at a PaineWebber conference in New York.

The No. 2 U.S. office products retailer after Office Depot Inc., also said it aims to increase sales to $10 billion by 2000. Revenue is expected to rise 20% a year, boosting per-share earnings 30%, Mahoney said.

The company plans to increase the number of stores it opens to 150 in 1998 from 120 this year, Mahoney said. Staples now operates 599 stores in the U.S., 40 stores in the United Kingdom and 16 stores in Germany.

Staples will also reorganize 50 of its copy centers this year into 24-hour operations as part of an effort to broaden the variety of its office services.

The company is expanding its contract and commercial division, which includes the catalog and corporate customer businesses. That group is expected to generate about 30% of the company’s revenue this year, up from 5% five years ago, said Ronald Sargent, president of the contract and commercial unit, at the conference.

Mahoney also said that a U.S. district court’s judgment on Staples’ $4-billion purchase of Office Depot is expected to be issued around June 19, two weeks after today’s closing arguments.

In its first quarter, Staples said profit from operations rose 61% to $20.9 million, or 12 cents a share, from $13 million, or 8 cents, in the same period a year earlier.

Revenue rose 25% to $1.15 billion from $917 million, and same-store sales rose 9%.

During the quarter, the company also reported a $12.5-million charge for legal fees, consulting and advertising related to the proposed Office Depot purchase.

Shares in the Westborough, Mass.-based company fell 3.125 cents to close at $22.625 on Nasdaq.