FRAMINGHAM, Mass.-- Staples, Inc. announced today the results for its fourth quarter (14 weeks) and fiscal year (53 weeks) ended February 3, 2007. Total company sales for the fourth quarter grew 18 percent to $5.3 billion compared to the same quarter of 2005. North American Retail revenues increased 14 percent and North American Delivery sales increased 24 percent. International sales grew 16 percent in local currency or 27 percent in US dollars. Total company net income of $336 million rose 22 percent, and earnings per share of $0.46, on a diluted basis, rose 24 percent compared to the fourth quarter of 2005. North American Retail comparable store sales, calculated on a 13 week basis, rose one percent versus last year and, in Europe, comparable store sales increased five percent. Excluding $370 million of total company sales during the extra week in the fourth quarter, sales increased 10 percent compared to last year. Excluding North American Retail sales of $210 million and North American Delivery sales of $129 million during the extra week in the fourth quarter, North American Retail sales increased six percent and North American Delivery revenues increased 14 percent. Excluding International sales of $31 million during the extra week in the fourth quarter, sales grew 11 percent in local currency or 22 percent in US dollars. For fiscal year 2006, sales reached $18.2 billion, a 13 percent increase compared to 2005. Full year North American Retail sales rose 10 percent and North American Delivery revenues increased 19 percent. In 2006, e-commerce sales of $4.9 billion increased 28 percent versus last year. International sales rose 10 percent in local currency or 13 percent in US dollars. The company reported 2006 net income of $974 million, a 24 percent increase versus last year. Earnings per share of $1.32, on a diluted basis, rose 27 percent versus 2005. Adjusted for the impact of favorable tax events and the correction for prior years’ stock-based compensation reported in the third quarter, earning per share were $1.28. Both North American Retail and European comparable store sales, calculated on a 52 week basis, increased three percent for the year. The company generated $637 million in free cash flow after $528 million in capital expenditures. Excluding the 53rd week in 2006, total company sales increased 11 percent versus last year. Excluding the extra week, North American Retail sales increased eight percent, North American Delivery revenues increased 16 percent, and International sales grew eight percent in local currency, or 11 percent in US dollars. “Our 74,000 associates delivered another terrific year in 2006,” said Ron Sargent, Staples’ chairman and CEO. “We drove strong top and bottom line growth, while investing in new ideas and making steady progress on the key initiatives that will continue to drive our business.” Key company accomplishments in 2006: Total Company * FY2006 total company operating margin increased 38 basis points to 8.1 percent. * Inventory turns increased 16 basis points to 5.92 times, continuing to demonstrate the benefits of the Summit supply chain program. * Staples’ own brand products reached 20 percent of sales for the year and the company established a long-term goal to reach 30 percent of sales. * Staples branded aisles are featured in more than 2,400 grocery stores throughout the US, including more than 1,500 Safeway locations. North American Retail * FY2006 operating margin in North American Retail increased 30 basis points to 9.6 percent. * In Q4, the company experienced positive customer traffic and solid performance in key categories, such as office supplies, ink, and copy & print. * Staples opened 99 stores in 2006, including 23 stores in new markets and three stand alone Copy & Print shops in the Boston area. The company ended the year with 1,620 stores in North America. * The company re-launched and re-branded its technology services initiative, EasyTech. Every Staples store in the US offers an in-store technician to help customers with services such as hardware and software installations, data protection, and security. North American Delivery * FY2006 operating margin in North American Delivery increased 40 basis points to 10.7 percent. * The company continues to increase sales to existing customers through “share of wallet” initiatives. North American Delivery added capabilities in IT products and services, and expanded its assortment of industrial packaging supplies through its strategic acquisitions of Thrive Networks and Chiswick. * Staples opened three fulfillment centers in 2006, in Atlanta, Orlando, and Chicago. In 2007, Staples plans to open a new fulfillment center in Denver. International * International operations improved operating margin by 149 basis points to 2.1 percent for the full year. * New advertising and direct mail campaigns are showing positive results in European retail. In Q4, Staples’ comparable store sales in European retail rose five percent, with five percent comparable store sales in the UK, its best quarterly comp performance since 2003. * In Q4 and FY2006, Staples European Catalog drove strong sales and doubled operating margin, with particularly solid improvement in France and Italy. * The company announced a joint venture in India with Pantaloon Retail Limited, and plans to acquire Pei Pei, a chain of office products retail stores in the Jiangsu province near Shanghai, China. The company also announced an annual cash dividend of $0.29 per share payable on April 19, 2007, to shareholders of record on March 30, 2007. This represents a 32 percent increase versus 2006. “With great people, solid execution, and many new growth ideas, Staples is well positioned to continue to build on our success in 2007,” said Sargent. Q1 2007 Outlook The company expects to achieve high single-digit growth on the top line and a positive, low single-digit comparable store sales increase in North American Retail. Staples expects mid single-digit sales growth in North American Retail, with the calendar shift resulting from the 53rd week in 2006 reducing sales growth expectations by approximately two percentage points. Staples anticipates mid-teens growth in North American Delivery, and high single-digit sales growth in local currency in International. The company expects to achieve earnings per share growth of 15 to 20 percent. 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 earnings per share growth of 15 to 20 percent for the full year 2007, equating to a range of $1.43 to $1.49 of earnings per share, or eight to 13 percent earnings growth on a GAAP basis. Excluding the extra week, Staples expects low double-digit sales growth for the total company, or high single-digit sales growth on a GAAP basis. Staples expects a positive, low single-digit comparable sales increase in North American Retail. Excluding the additional week in 2006, the company expects to grow North American Delivery revenues in the mid-teens, or low-teens on a GAAP basis, and in International, Staples expects low double-digit growth in local currency.