Staples Inc. said its improved remedy proposal to win antitrust approval for Office Depot Inc. was rejected by the U.S. Federal Trade Commission, which sued to block the merger of the office supply retailers earlier this month. Staples, No. 4 in the Internet Retailer 2015 Top 500 Guide, said it offered to transfer commercial contracts worth up to $1.25 billion from $500 million previously, according to a statement Monday. The FTC rejected that offer without making a counteroffer, Framingham, Mass.-based Staplessaid in the statement. The company said it’s willing to continue negotiations with the FTC to reach a settlement that addresses its concerns.
Staples, Inc. (Nasdaq: SPLS) announced today the results for its first quarter ended April 30, 2016. Total company sales for the first quarter of 2016 were $5.1 billion, a decrease of three percent compared to the first quarter of 2015. On a GAAP basis, the company reported net income of $41 million, or $0.06 per diluted share. First quarter 2016 results on a GAAP basis include pre-tax charges of $66 million primarily related to costs associated with the proposed acquisition of Office Depot and store closures, and $32 million related to the pending sale of the company’s Print Solutions business.
Total company sales for the first quarter of 2016 decreased one percent compared to the first quarter of 2015 after excluding the impact of changes in foreign exchange rates and store closures during the past year. Excluding the impact of charges taken during the first quarter of 2016, the company reported non-GAAP net income of $109 million, or $0.17 per diluted share, versus first quarter 2015 non-GAAP net income of $109 million, or $0.17 per diluted share.
“We delivered a solid first quarter and we made good progress on our critical priorities,” said Ron Sargent, Staples’ chairman and chief executive officer. “We grew sales in key categories beyond office supplies, drove growth in our mid-market contract business, and improved customer conversion in stores and online. We plan to build on our momentum as we pursue our strategic plan to enhance long-term value.”
First Quarter 2016 Highlights
*Reduced total company selling, general and administrative expense as a percentage of sales by 28 basis points on a GAAP basis, or 44 basis points on a non-GAAP basis after excluding charges of $24 million during the first quarter of 2016 and $15 million during the first quarter of 2015.
*Improved total company operating income rate by 27 basis points on a GAAP basis, or 14 basis points on a non-GAAP basis after excluding charges of $67 million during the first quarter of 2016 and $75 million during the first quarter of 2015.
*Grew sales in North American Commercial one percent on a local currency basis.
*Grew operating income in North American Commercial by $14 million and improved operating income rate by 63 basis points.
*Generated operating cash flow of $276 million and invested $44 million in capital expenditures resulting in free cash flow of $232 million.
*Closed 14 stores in North America as part of a previously announced plan to close approximately 50 stores in North America during 2016.
Sales for the first quarter of 2016 were $2.2 billion, a decrease of five percent compared to the first quarter of 2015. Store closures negatively impacted first quarter 2016 sales growth by approximately two percent. Sales growth was also negatively impacted by approximately one percent due to changes in foreign exchange rates. Comparable sales, which combines comparable store sales and Staples.com sales growth excluding the impact of changes in foreign exchange rates, decreased three percent versus the prior year. Sales declines in business machines, technology accessories, computers and mobility, and ink and toner were partially offset by growth in furniture, office supplies, facilities supplies, and copy and print. Comparable store sales decreased four percent, reflecting a two percent decline in average order size and a two percent decline in traffic versus the prior year. Staples.com sales were flat in U.S. dollars and grew one percent on a local currency basis during the first quarter of 2016.
Operating income rate decreased 40 basis points to 2.8 percent compared to the first quarter of 2015. This primarily reflects the negative impact of lower sales on fixed expenses and lower product margin rate in Staples.com. This was partially offset by reduced marketing expense, improved retail product margin rate, and savings related to a reduction in headcount versus the prior year.
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