UPDATE 2: Staples Quarterly Profit Exceeds Expectations by a Penny, According to Reuters

Staples Reports Slightly Higher-Than-Expected Quarterly Earnings

• Q1 EPS excluding items: 22 cents vs. 21-cent estimate
• Strong performance from Corporate Express segment
• Shares increase by 1 cent to $20.40

NEW YORK, May 27 (Reuters) – Leading office products retailer Staples Inc announced quarterly earnings that slightly exceeded expectations, thanks in part to its Corporate Express division.

Following its acquisition of Corporate Express last July, Staples continues to anticipate cost savings of up to $300 million from the integration of the Dutch company.

For the first quarter ending May 2, net earnings dropped to $147 million, or 20 cents per share, down from $212.2 million, or 30 cents per share, in the same period last year. Excluding integration and restructuring costs totaling $19 million, Staples reported earnings of 22 cents per share, slightly surpassing analysts’ average forecast.

Sales rose 19 percent to $5.82 billion during the quarter.

The company noted that it is progressing with its Corporate Express integration, which includes vendor pricing negotiations and efforts to minimize the proportion of small orders.

However, North American retail sales declined by 9 percent to $2.2 billion, with existing store sales down 8 percent. This decline was attributed to reduced average order sizes and a slowdown in demand for durable goods such as business machines and furniture.

The ongoing U.S. recession has significantly impacted office supply retailers as both consumers and small businesses have scaled back on purchasing major items like furniture and computers.

In contrast, last month competitors OfficeMax Inc and Office Depot reported better-than-expected results, benefiting from cost-cutting measures that helped counter substantial sales declines.

In response to the challenging market, Staples has implemented several cost-cutting strategies, including staff reductions, salary freezes for senior management, cuts to corporate bonuses, and limitations on new store openings.

As of pre-market trading, the company’s shares were up by 1 cent to $20.40.