By Chelsey Dulaney
Staples Inc. on Wednesday warned that it could book a loss on a
possible card-data breach disclosed in October, even as the as the
office-supplies chain posted fiscal third-quarter results that were
mostly in line with expectations.
Staples said it believes it has identified the malware used in
the breach, which impacted some of its retail point-of-sale and
computer systems. Staples said it is working with law enforcement,
and that it can't yet estimate its losses related to the
incident.
The possible breach follows a string of costly data-security
issues at retailers such as Home Depot Inc. and Target Corp.
Staples shares climbed 3.5% in premarket trading.
Staples said it is accelerating plans to close underperforming
stores and spark online sales growth, as sales have slumped and
traffic has fallen in the face of stronger competition online and
weaker demand for traditional office supplies.
The company has broadened its product selection recently and
worked to beef up its online presence. The company has also been
closing stores, with 127 closures so far this year. Staples on
Wednesday said it plans to close 170 stores in North America this
year, up from the 140 stores it said it planned to close in
August.
Staples is also looking to downsize locations, as several
products, such as tablet computers, take up less space than the
usual sort of office supplies, such as filing cabinets and desktop
computers.
For the quarter ended Nov. 1, Staples reported a profit of
$216.8 million, or 34 cents a share, compared with a profit of
$135.2 million, or 21 cents a share, a year earlier. Excluding
restructuring and other charges, earnings were 37 cents a
share.
Sales fell 2.5% to $5.96 billion.
The company in August had projected earnings of 34 cents to 39
cents a share and a decline in sales for the quarter, which
includes the crucial back-to-school shopping period. Analysts
polled by Thomson Reuters were expecting $5.93 billion in
revenue.
Excluding the impact of closed stores and foreign exchange
rates, sales edged up 0.5% in the quarter. North American
same-store sales fell 4%, reflecting a decline in traffic and flat
average order size. Meanwhile, sales through Staples.com rose
9%.
Staples said its commercial operations in North America posted a
3.3% increase in sales to $2.16 billion, reflecting higher demand
for facilities and break-room supplies, among other products. Ink
and toner sales declined in the segment, however.
For the current quarter, Staples said it expects to posted
adjusted earnings of 27 cents to 32 cents a share and a decline in
sales. Analysts polled by Thomson Reuters had recently projected
earnings of 31 cents a share and a 2% decline in revenue.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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