FRAMINGHAM, Mass. Nov. 14, 2006--Staples announced today the results for its third quarter ended October 28, 2006. The company drove strong performance in each of its three businesses, gaining market share and winning with customers around the world. Total company sales for the third quarter 2006 increased 12 percent to $4.8 billion compared to the $4.2 billion reported for the third quarter of 2005. Net income rose 29 percent year-over-year to $290 million, and earnings per share, on a diluted basis, increased 30 percent to $0.39, from the $0.30 achieved in the third quarter of last year. Third quarter 2006 earnings results reflect a lower tax rate, due to the favorable resolution of certain tax matters, and a correction for prior years' stock-based compensation. Excluding these items, net income grew 18 percent to $265 million and earnings per share, on a diluted basis, were $0.36, a 20 percent increase versus third quarter 2005. Third quarter North American Retail comparable store sales increased four percent versus 2005, reflecting an excellent back-to-school season, strong traffic, and higher average order size. Total North American Retail sales rose nine percent and North American Delivery grew sales 16 percent versus last year. International sales rose 10 percent in local currency and 15 percent in US dollars, with five percent comparable store sales growth in European Retail. "The Staples team delivered another strong quarter of results," said Ron Sargent, Staples' chairman and chief executive officer. "While we continue to improve margins, we're focused on driving profitable growth, and we're pleased to see top line momentum in every part of our business." Highlights for the third quarter include: - North American Retail continued to see strength in core office supplies, laptops, copy and print services, ink, and Staples brand products. Operating margins in this segment improved 50 basis points to 10.8 percent. - North American Delivery operating margins improved 40 basis points to 10.8 percent, despite costs associated with opening three new fulfillment centers in Orlando, Atlanta, and Chicago this year. - Worldwide e-commerce sales grew 27 percent to $1.2 billion. - International operating margins improved 130 basis points to 1.5 percent, reflecting leverage on stronger sales and improving trends in Europe, particularly in the UK retail and French catalog businesses. Asian and South American businesses continue to grow rapidly. - Staples opened 31 new stores in the United States and opened 6 stores in Canada. The company now operates 1,838 stores worldwide. Q4 & FY2006 Outlook For the fourth quarter of 2006, Staples will benefit from an extra week in the quarter. As a result, the company expects high-teens growth for the total company and earnings per share growth slightly higher than 20 percent. The company expects a positive low single-digit comparable sales increase in its North American Retail business. Same store sales are calculated on a 13 week basis. For the full year, the company expects to exceed its previously announced earnings guidance of 15 to 20 percent growth, excluding the third quarter tax benefit and the correction for prior years' stock-based compensation. Staples expects low double-digit growth for the total company on the top line and a positive, low single-digit comparable sales increase in North American Retail. Staples expects free cash flow generation of about $700 million this year. Earnings growth expectations for the fourth quarter and full year 2006 refer to 2005 earnings restated to include the impact of stock compensation expense under the Financial Accounting Standards Board's statement 123R, which the company implemented as of January 29, 2006, and exclude the benefit of the resolution of tax matters and the correction for prior years' stock-based compensation. Pro forma restated financial statements and other supplemental financial information are available on the "Financial Measures" section of the investor relations website on www.staples.com. The company's earnings outlook also reflects the impact of a 53rd week in fiscal 2006. FY2007 Outlook The company's guidance for 2007 is based on comparison to 2006 performance adjusted for the 53rd week, the third quarter earnings per share impact of favorable tax events, and the correction for prior years' stock-based compensation. Excluding these items, the company expects to achieve sales growth of 10 to 15 percent and earnings growth of 15 to 20 percent for the full year 2007, equating to a range of $1.43 to $1.49 of GAAP earnings per share. Staples expects a positive, low single-digit comparable sales increase in North American Retail. After adjusting for the additional week in 2006, the company expects to grow North American Delivery revenues in the mid-teens, and in International, Staples expects low double-digit growth in local currency.