Staples, Inc. Earnings Webcast Second Quarter 2011 August 17, 2011 1
Safe Harbor Forward Looking Statements Safe Harbor Certain remarks that we may make about management s future expectations, plans and prospects constitute forwardlooking statements. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including those discussed or referenced under the heading Risk Factors and elsewhere in our most recent Form 10-Q on file with the SEC. Non-GAAP Financial Measures This presentation includes certain results both with and without the integration and restructuring expense associated with Corporate Express in 2010, certain results for 2010 and 2011 both with and without the impact of fluctuations in foreign currency exchange rates, and certain results with and without the impact of the tax refund in 2011. The presentation of results that excludes these items, as well as the presentation of free cash flow, 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 provide a meaningful comparison to prior periods because the adjustments do not affect the ongoing operations of the combined businesses. Management uses these non-gaap financial measures to evaluate the operating results of the company s business against prior year results and its operating plan, and to forecast and analyze future periods. Management recognizes there are limitations associated with the use of non-gaap financial measures as they may reduce comparability with other companies that use different methods to calculate similar non- GAAP measures. Management generally compensates for the limitations resulting from the exclusion of these items by considering the impact of these items separately in GAAP as well as non-gaap results. In addition, Management presents the most comparable GAAP measures ahead of non-gaap measures and provides a reconciliation that indicates and describes the adjustments made. Please see the Financial Measures and Other Data section of the Investor Information portion of www.staples.com for an explanation and reconciliation of some of such measures. 2
Q2 2011 Headlines Achieved total company sales of $5.8 billion, a 5% increase compared to Q2 2010. Delivered adjusted earnings per share of $0.22, up 10% compared to Q2 2010. Grew sales 3% in North American Delivery. Grew sales 2% in North American Retail, with positive U.S. comps. Increased International sales 15% in U.S. dollars, or flat in local currency. 3
North American Delivery Q2 2011 Sales ($ millions) Operating Income Rate $3,500 $3,000 $2,500 $2,000 +3% $2,359 $2,433 12% 10% 8% 8.7% -33 bps 8.4% $1,500 6% $1,000 4% $500 2% $0 Q2 2010 Q2 2011 0% Q2 2010 Q2 2011 4
North American Delivery Headlines Grew the top line in Contract, Quill and Staples.com. Growth in core office supplies, while paper and ink were flat. Facilities and Breakroom initiative increased double digits with growth in all three channels. Strong customer acquisition and retention in Contract. Operating income rate declined 33 basis points to 8.4%. Staples.com achieved solid operating margin expansion. 5
North American Retail Q2 2011 Sales ($ millions) Operating Income Rate $3,500 $3,000 12% +2% -23 bps 10% $2,500 $2,000 $1,500 $2,011 $2,045 8% 6% 5.3% 5.0% $1,000 4% $500 2% $0 Q2 2010 Q2 2011 0% Q2 2010 Q2 2011 6
North American Retail Headlines Sales grew 2%, or flat in local currency. Same store sales flat versus Q2 2010. Strength in Copy & Print, technology services, consumer electronics, and paper offset by weakness in printers and computer media. Customer count comps down 1% and average order size up 1%. EasyTech growth accelerated. Operating income rate declined 23 basis points to 5.0%. 7
North American Retail Store Network Opened eight stores and closed two stores during Q2. Operated 1,907 stores in North America at the end of Q2. Expect to open 20 net new stores in 2011. 8
International Q2 2011 Sales ($ millions) Operating Income Rate $2,000 6% +15% +7 bps 5% $1,500 $1,164 $1,341 4% $1,000 3% $500 2% 1% 1.2% 1.2% $0 Q2 2010 Q2 2011 0% Q2 2010 Q2 2011 9
10 International Headlines Sales grew 15% in U.S. dollars, or flat in local currency. Operating income rate increased 7 basis points from Q2 2010. European Delivery grew sales 6% in local currency with Contract up high single digits and the Direct business up low single digits. European Retail comps declined 5%. German Retail posted positive comps in the quarter. China, India, and South America grew the top line. Australia s top line decreased low single digits in local currency.
Q2 2011 Financial Metrics Total company sales grew 5% helped by 400 basis points of stronger foreign currency. GAAP EPS grew 39% to $0.25. Gross profit margin of 26.5%, increased 4 basis points versus Q2 2010. Selling, General and Administrative expense deleveraged 49 basis points on an adjusted basis. Adjusted operating margin of 4.8% decreased 46 basis points versus Q2 2010. Generated free cash flow of $138 million year to date after capital expenditures of $164 million. Repurchased 12 million shares for $199 million during Q2 2011. 11
Outlook $ in Millions, Except Per Share Data Q3 2011 FY 2011 Sales Growth Low single-digits Low single-digits Adjusted EPS* $0.46 to $0.48 $1.39 to $1.45 Effective Tax Rate N/A 34% Capital Expenditures N/A ~$400 Free Cash Flow N/A >$1,000 Actual results may differ materially due to Risk Factors described in our most recent 10-Q. 12
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