FRAMINGHAM, Mass. - Staples Inc. had fourth-quarter net income of $93.8 million and raised this year's profit estimate as the second-largest U.S. office supply retailer continued to reduce costs and remodel stores.
The company reported earnings of 20 cents a share in its fiscal fourth quarter that ended Feb. 2. That compares with a loss of $111.7 million, or 23 cents, a year ago. Profit will be 76 cents to 80 cents this year, almost double last year's results, Staples predicted.
The company said it would have earned $136 million, or 29 cents a share, excluding certain costs to close 31 stores. On that basis, it topped the 26-cent average analyst forecast.
Staples stopped selling less-profitable items, such as $399 personal computers, and increased higher-margin products, including printer cartridges, for small business customers in the fourth quarter.
Chief Executive Officer Ronald L. Sargent, who took over last month, said new store designs, the remodeling of 125 stores and $200 million in cost-cutting will boost profit.
Profit "margins are getting better and there are some real specific initiatives that they can work on to get them even better," said David Yucius, president of Atlanta-based Aurora Investment Counsel, which manages $150 million of assets and owns 90,000 Staples shares.
Staples' sales fell 6 percent to $2.93 billion, with sales at stores open at least a year falling 4 percent. Sales at larger rival Office Depot Inc. and No. 3 office supply retailer OfficeMax Inc. also declined as customers bought less due to the recession.
Staples expects to meet this year's profit forecast even without an improvement in the economy, Sargent told analysts and investors in a conference call.
Staples' shares fell 32 cents to close at $19.68 yesterday on the Nasdaq stock market.
The company plans to open 75 U.S. stores this year, 20 in Canada, and 20 in Europe, including the first Staples in Belgium. The new stores are to average 20,000 square feet, down from the 24,000 square feet previously.
Staples also plans to cut $200 million in costs, most of which will occur this year, Sargent said.