FRAMINGHAM, Mass.--(BUSINESS WIRE)--December 2, 2008--Staples, Inc. (Nasdaq: SPLS) announced today the results for its third quarter ended November 1, 2008. Total company sales increased 34 percent to $7.0 billion compared to the third quarter of 2007. Net income declined 43 percent year over year to $157 million, and earnings per share, on a diluted basis, decreased 42 percent to $0.22, from the $0.38 achieved in the third quarter of last year. Excluding the impact of Corporate Express, total company sales decreased three percent to $5.0 billion compared to the third quarter of 2007.

Excluding the pre-tax charge of $38 million related to the settlement of California wage and hour class action litigation realized during the third quarter of 2007, as well as the impact of previously announced special charges related to the acquisition of Corporate Express during the third quarter of 2008, adjusted earnings per share, on a diluted basis, were flat versus the third quarter of 2007 at $0.42.

As a result of the company’s decision to move toward one global Staples brand, the legacy brands associated with Staples European Catalog will be eliminated over time. During the third quarter of 2008, the company recorded a non-cash, pre-tax charge of $124 million, reflecting its plans to discontinue the use of trade names Staples obtained from the 2002 Guilbert acquisition.

The company also recorded a pre-tax integration and restructuring expense of $9 million related to Corporate Express during the third quarter of 2008.

Additionally, the company is developing tax planning strategies to optimize the benefits of the net operating losses of Corporate Express. As a result of the company’s evolving plans, Staples recorded a non-cash charge of $57 million, which resulted in a one-time increase to the company’s effective tax rate in the third quarter of 2008. The company anticipates finalizing its tax planning strategy to mitigate the financial impact of this charge in the next three to six months.

Including $1.1 billion of Corporate Express sales, North American Delivery grew sales 61 percent to $2.8 billion during the third quarter of 2008. Excluding the impact of Corporate Express, North American Delivery sales declined one percent to $1.7 billion during the third quarter, reflecting lower spend per existing customer, particularly in durable categories such as furniture and business machines, partially offset by strong customer acquisition and retention, as well as strength in ink and paper.

North American Retail sales decreased six percent in the third quarter of 2008 to $2.6 billion, and comparable store sales decreased eight percent versus the third quarter of 2007. This reflects declines in average order size and customer traffic, as well as weakness in computers and accessories, business machines, and furniture, partially offset by strength in technology services and ink.

Including $886 million of Corporate Express sales, International sales increased 127 percent to $1.6 billion during the third quarter of 2008. Excluding the impact of Corporate Express, International sales declined one percent in US dollars and were flat in local currency compared to the third quarter of 2007. Comparable store sales in Europe decreased six percent versus the same period in 2007, as a result of weakness in average order size and customer traffic.

“Staples’ formula of focusing on customers and investing in our business continues to pay off with market share gains in these challenging times,” said Ron Sargent, Staples’ chairman and chief executive officer. “We are pleased with our progress integrating Corporate Express, encouraged by our plans to drive store productivity in North American Retail, and enthusiastic about our top and bottom line opportunities in International.”

As a result of the Corporate Express acquisition, the company anticipates total annual synergies to build, over a three-year period, to $300 million. In conjunction with the acquisition, the company expects to incur the following incremental expenses during Q4 2008 and FY 2009.

This press release presents certain results both with and without the results of Corporate Express. The presentation of results that exclude these items are non-GAAP financial measures that should be considered in addition to, and should not be considered superior to or as a substitute for, the presentation of results determined in accordance with GAAP. Management believes that the non-GAAP financial measures presented in this press release provide a more meaningful comparison of the company’s year-over-year performance. Management also uses these non-GAAP financial measures to evaluate the operating results of the company’s pre-acquisition business against prior year results and its operating plan.

The company will host a conference call today at 8:00 a.m. (ET) to review these results and its outlook. Investors may listen to the call at http://investor.staples.com.

Staples, the world’s largest office products company, is committed to making it easy for customers to buy a wide range of office products, including supplies, technology, furniture, and business services. With $27 billion in sales, Staples serves businesses of all sizes and consumers in 27 countries throughout North and South America, Europe, Asia and Australia. In July 2008, Staples acquired Corporate Express, one of the world’s leading suppliers of office products to businesses and institutions. Staples invented the office superstore concept in 1986 and is headquartered outside Boston. More information about Staples (Nasdaq: SPLS) is available at www.staples.com.

Certain information contained in this news release constitutes forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995 including, but not limited to, the information set forth under headings that include the words “Corporate Express Integration Outlook” or “Estimates” and other statements regarding our future business and financial performance. Some of the forward-looking statements are based on a series of expectations, assumptions, estimates and projections which involve substantial uncertainty and risk, including the review of our assessments by our outside auditor and changes in management’s assumptions and projections. Actual results may differ materially from those indicated by such forward-looking statements as a result of risks and uncertainties, including but not limited to: economic conditions may cause a decline in business and consumer spending which could adversely affect our business and financial performance; our market is highly competitive and we may not continue to compete successfully; we may not be able to successfully integrate Corporate Express into our existing operations to realize anticipated benefits and our growth may strain our operations; we may be unable to continue to open new stores and enter new markets successfully; if we are unable to manage our debt, it could materially harm our business and financial condition and restrict our operating flexibility; we may be unable to attract and retain qualified associates; our quarterly operating results are subject to significant fluctuation; our expanding international operations expose us to the unique risks inherent in foreign operations; our business may be adversely affected by the actions of and risks associated with our third party vendors; our expanded offering of proprietary branded products may not improve our financial performance and may expose us to intellectual property and product liability claims; our effective tax rate may fluctuate; our information security may be compromised; various legal proceedings may adversely affect our business and financial performance; and those other factors discussed or referenced in our most recent quarterly report on Form 10-Q filed with the SEC, under the heading “Risk Factors” and elsewhere, and any subsequent periodic or current reports filed by us with the SEC. In addition, any forward-looking statements represent our estimates only as of the date such statements are made (unless another date is indicated) and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

STAPLES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollar Amounts in Thousands, Except Share Data)
(Unaudited)

	November 1,			February 2,
	2008			2008
ASSETS
Current assets:
Cash and cash equivalents	$	887,700		$	1,245,448
Short-term investments		-			27,016
Receivables, net		2,096,663			822,254
Merchandise inventories, net		2,668,289			2,053,163
Deferred income tax asset		242,279			173,545
Prepaid expenses and other current assets		284,911			233,956
Total current assets		6,179,842			4,555,382

Property and equipment:
Land and buildings		1,028,726			859,751
Leasehold improvements		1,185,903			1,135,132
Equipment		1,932,415			1,819,381
Furniture and fixtures		917,514			871,361
Total property and equipment		5,064,558			4,685,625
Less accumulated depreciation and amortization		2,722,815			2,524,486
Net property and equipment		2,341,743			2,161,139

Lease acquisition costs, net of accumulated amortization		28,397			31,399
Intangible assets, net of accumulated amortization		766,145			231,310
Goodwill		3,724,004			1,764,928
Other assets		993,087			292,186
Total assets	$	14,033,218		$	9,036,344

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,497,903		$	1,560,728
Accrued expenses and other current liabilities		1,229,646			1,025,364
Commercial paper		948,728			-
Debt maturing within one year		1,991,604			23,806
Total current liabilities		6,667,881			2,609,898

Long-term debt		1,149,645			342,169
Other long-term obligations		775,289			356,043
Minority interest		58,345			10,227

Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued		-			-
Common stock, $.0006 par value, 2,100,000,000 shares authorized; issued 882,167,337 shares at November 1, 2008 and 867,366,103 shares at February 2, 2008		529			520
Additional paid-in capital		3,987,666			3,720,319
Cumulative foreign currency translation adjustments		(331,446	)		476,399
Retained earnings		5,081,290			4,793,542
Less: Treasury stock at cost - 166,381,578 shares at November 1, 2008 and 162,728,588 shares at February 2, 2008		(3,355,981	)		(3,272,773	)
Total stockholders' equity		5,382,058			5,718,007
Total liabilities and stockholders' equity	$	14,033,218		$	9,036,344

STAPLES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data)
(Unaudited)

	13 Weeks Ended						39 Weeks Ended
	November 1,			November 3,			November 1,			November 3,
	2008			2007			2008			2007

Sales	$	6,950,933		$	5,168,351		$	16,910,207		$	14,048,240
Cost of goods sold and occupancy costs		5,086,799			3,662,677			12,323,649			10,047,260
Gross profit		1,864,134			1,505,674			4,586,558			4,000,980

Operating and other expenses:
Selling, general and administrative		1,314,134			1,072,998			3,450,599			2,957,909
Integration and restructuring costs		132,282			-			132,445			-
Amortization of intangibles		28,011			4,371			46,426			11,681
Total operating expenses		1,474,427			1,077,369			3,629,470			2,969,590

Operating income		389,707			428,305			957,088			1,031,390

Other income (expense):
Interest income		5,366			8,715			23,148			34,895
Interest expense		(59,902	)		(8,466	)		(88,348	)		(30,667	)
Miscellaneous expense		(2,833	)		15			(3,223	)		(1,472	)
Income before income taxes and minority interests		332,338			428,569			888,665			1,034,146
Income tax expense		171,644			154,285			363,588			372,293
Income before minority interests		160,694			274,284			525,077			661,853
Minority interests		3,991			(234	)		5,859			(636	)
Net income	$	156,703		$	274,518		$	519,218		$	662,489


Earnings Per Share:

Basic earnings per common share	$	0.22		$	0.39		$	0.75		$	0.94

Diluted earnings per common share	$	0.22		$	0.38		$	0.73		$	0.92

Dividends declared per common share	$	-		$	-		$	0.33		$	0.29

Weighted average shares outstanding:

Basic		701,161,150			702,258,662			696,811,222			707,301,022

Diluted		712,711,480			715,257,576			710,684,025			723,415,325

STAPLES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
(Unaudited)

	39 Weeks Ended
	November 1,			November 3,
	2008			2007
Operating Activities:
Net income	$	519,218		$	662,489
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		396,590			285,940
Amortization of deferred financing costs		8,982			-
Non-cash write-down of indefinite lived intangible assets		123,775			-
Stock-based compensation		134,196			133,196
Deferred tax expense		19,190			25,272
Excess tax benefits from stock-based compensation arrangements		(5,992	)		(17,395	)
Other		5,575			1,679
Changes in assets and liabilities:
Increase in receivables		(130,794	)		(113,711	)
Increase in merchandise inventories		(70,085	)		(99,489	)
Increase in prepaid expenses and other assets		(16,402	)		(51,323	)
Increase in accounts payable		30,711			114,724
Increase (decrease) in accrued expenses and other liabilities		115,711			(189,720	)
Increase in other long-term obligations		34,431			90,161
Net cash provided by operating activities		1,165,106			841,823

Investing Activities:
Acquisition of property and equipment		(243,777	)		(315,905	)
Acquisition of businesses and investments in joint ventures, net of cash acquired		(4,381,811	)		(178,295	)
Proceeds from the sale of short-term investments		27,019			3,776,385
Purchase of short-term investments		(3	)		(3,440,117	)
Net cash used in investing activities		(4,598,572	)		(157,932	)

Financing Activities:
Proceeds from the exercise of stock options and the sale of stock under employee stock purchase plans		129,769			125,703
Proceeds from issuance of commercial paper, net of repayments		948,728			-
Proceeds from borrowings		2,762,879			10,701
Payments on borrowings		(360,790	)		(204,889	)
Payment of deferred financing costs		(16,450	)		-
Cash dividends paid		(231,465	)		(207,552	)
Excess tax benefits from stock-based compensation arrangements		5,992			17,395
Purchase of treasury stock, net		(83,208	)		(578,159	)
Net cash provided by (used in) financing activities		3,155,455			(836,801	)

Effect of exchange rate changes on cash and cash equivalents		(79,737	)		45,960

Net decrease in cash and cash equivalents		(357,748	)		(106,950	)
Cash and cash equivalents at beginning of period		1,245,448			1,017,671
Cash and cash equivalents at end of period	$	887,700		$	910,721

STAPLES, INC. AND SUBSIDIARIES
Segment Reporting
(Dollar Amounts in Thousands)
(Unaudited)

	13 Weeks Ended						39 Weeks Ended

	November 1,			November 3,			November 1,			November 3,
	2008			2007			2008			2007
Sales:
North American Retail	$	2,599,204		$	2,750,884		$	7,095,568		$	7,225,679
North American Delivery		2,783,195			1,727,141			6,469,487			4,896,999
International Operations		1,568,534			690,326			3,345,152			1,925,562
Total sales	$	6,950,933		$	5,168,351		$	16,910,207		$	14,048,240

Business Unit Income:
North American Retail	$	267,558		$	305,869		$	546,342		$	652,252
North American Delivery		246,206			187,450			583,023			507,380
International Operations		55,624			23,064			94,364			42,954
Total business unit income		569,388			516,383			1,223,729			1,202,586
Stock-based compensation		(47,399	)		(50,078	)		(134,196	)		(133,196	)
Integration and restructuring costs		(132,282	)		-			(132,445	)		-
Impact of wage and hour settlement		-			(38,000	)		-			(38,000	)
Total segment income		389,707			428,305			957,088			1,031,390
Interest and other income (expense), net		(57,369	)		264			(68,423	)		2,756
Income before income taxes and minority interest	$	332,338		$	428,569		$	888,665		$	1,034,146

STAPLES, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data)
(Unaudited)

	13 Weeks Ended
	November 1, 2008															November 3, 2007
	As reported		Non-Cash Write Down of Staples European Trade Names			Integration and Restructuring Expenses			Non-Cash Charge Related to Tax Planning Strategies			As Adjusted $		As Adjusted %		As reported			Wage and hour settlement			As Adjusted $			As Adjusted %


Sales	$	6,950,933	$	-		$	-		$	-		$	6,950,933	100.00	%	$	5,168,351		$	-		$	5,168,351		100.00	%
Cost of goods sold and occupancy costs		5,086,799		-			-			-			5,086,799	73.18	%		3,662,677			-			3,662,677		70.87	%
Gross profit		1,864,134		-			-			-			1,864,134	26.82	%		1,505,674			-			1,505,674		29.13	%

Operating and other expenses:
Selling, general and administrative		1,314,134		-			-			-			1,314,134	18.91	%		1,072,998			(38,000	)		1,034,998		20.03	%
Integration and restructuring charges		132,282		(123,775	)		(8,507	)		-			-	0.00	%		-			-			-		0.00	%
Amortization of intangibles		28,011		-			-			-			28,011	0.40	%		4,371			-			4,371		0.08	%
Total operating expenses		1,474,427		(123,775	)		(8,507	)		-			1,342,145	19.31	%		1,077,369			(38,000	)		1,039,369		20.11	%

Operating income		389,707		123,775			8,507			-			521,989	7.51	%		428,305			38,000			466,305		9.02	%

Interest and other income, net		57,369		-			-			-			57,369	0.83	%		(264	)		-			(264	)	(0.01	%)
Income before income taxes and minority interests		332,338		123,775			8,507			-			464,620	6.68	%		428,569			38,000			466,569		9.03	%
Income tax expense		171,644		42,702			2,935			(57,000	)		160,281	2.31	%		154,285			13,680			167,965		3.25	%
Income before minority interests		160,694		81,073			5,572			57,000			304,339	4.38	%		274,284			24,320			298,604		5.78	%
Minority interests		3,991		-			-			-			3,991	0.06	%		(234	)		-			(234	)	(0.00	%)
Net income	$	156,703	$	81,073		$	5,572		$	57,000		$	300,348	4.32	%	$	274,518		$	24,320		$	298,838		5.78	%


Earnings Per Share:

Basic earnings per common share	$	0.22	$	0.12		$	0.01		$	0.08		$	0.43			$	0.39		$	0.04		$	0.43

Diluted earnings per common share	$	0.22	$	0.11		$	0.01		$	0.08		$	0.42			$	0.38		$	0.04		$	0.42


Weighted average shares outstanding:

Basic		701,161,150															702,258,662

Diluted		712,711,480															715,257,576

STAPLES, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Consolidated Statements of Income
(Dollar Amounts in Thousands, Except Per Share Data)
(Unaudited)

	39 Weeks Ended
	November 1, 2008															November 3, 2007
	As reported		Non-Cash Write Down of Staples European Trade Names			Integration and Restructuring Expenses			Non-Cash Charge Related to Tax Planning Strategies			As Adjusted $		As Adjusted %		As reported			Wage and hour settlement			As Adjusted $			As Adjusted %


Sales	$	16,910,207	$	-		$	-		$	-		$	16,910,207	100.00	%	$	14,048,240		$	-		$	14,048,240		100.00	%
Cost of goods sold and occupancy costs		12,323,649		-			-			-			12,323,649	72.88	%		10,047,260			-			10,047,260		71.52	%
Gross profit		4,586,558		-			-			-			4,586,558	27.12	%		4,000,980			-			4,000,980		28.48	%

Operating and other expenses:
Selling, general and administrative		3,450,599		-			-			-			3,450,599	20.41	%		2,957,909			(38,000	)		2,919,909		20.78	%
Integration and restructuring charges		132,445		(123,775	)		(8,670	)		-			-	0.00	%		-			-			-		0.00	%
Amortization of intangibles		46,426		-			-			-			46,426	0.27	%		11,681			-			11,681		0.08	%
Total operating expenses		3,629,470		(123,775	)		(8,670	)		-			3,497,025	20.68	%		2,969,590			(38,000	)		2,931,590		20.87	%

Operating income		957,088		123,775			8,670			-			1,089,533	6.44	%		1,031,390			38,000			1,069,390		7.61	%

Interest and other income, net		68,423		-			-			-			68,423	0.40	%		(2,756	)		-			(2,756	)	(0.02	%)
Income before income taxes and minority interests		888,665		123,775			8,670			-			1,021,110	6.04	%		1,034,146			38,000			1,072,146		7.63	%
Income tax expense		363,588		42,702			2,991			(57,000	)		352,281	2.08	%		372,293			13,680			385,973		2.75	%
Income before minority interests		525,077		81,073			5,679			57,000			668,829	3.96	%		661,853			24,320			686,173		4.88	%
Minority interests		5,859		-			-			-			5,859	0.03	%		(636	)		-			(636	)	(0.00	%)
Net income	$	519,218	$	81,073		$	5,679		$	57,000		$	662,970	3.92	%	$	662,489		$	24,320		$	686,809		4.89	%


Earnings Per Share:

Basic earnings per common share	$	0.75	$	0.12		$	0.01		$	0.08		$	0.95			$	0.94		$	0.03		$	0.97

Diluted earnings per common share	$	0.73	$	0.11		$	0.01		$	0.08		$	0.93			$	0.92		$	0.03		$	0.95


Weighted average shares outstanding:

Basic		696,811,222															707,301,022

Diluted		710,684,025															723,415,325

CONTACT:
Staples, Inc.
Media Contact:
Paul Capelli/Owen Davis, 508-253-8530/8468
or
Investor Contact:
Laurel Lefebvre/Chris Powers, 508-253-4080/4632

Approximate Dollar Amounts in Millions
		Q4 2008	FY 2009

	Net Interest Expense	$60 - 70	$220 - 250
	Amortization of Intangibles	30 - 35	110 - 120
	Integration and Restructuring Expense	10 - 15	50 - 70
	Total	$100 - 120	$380 - 440