Staples (SPLS), the operator of office products superstores has announced 20.15 percent decline in profit for the quarter ended Aug. 2, 2014. The company earned $81.88 million or $0.13 a share in the second-quarter compared with $102.53 million or $0.16 a share a year ago. Adjusted earnings per share came in at $0.12, when analysts expected $0.11.
Revenue during the second-quarter went down marginally 1.78 percent to $5220.10 million from $5314.72 million in the last year period.
Gross margin contracted by 52 basis points over the last year period to 25.06 percent. Total expenses as a percentage of revenues increased to 99.63 percent from 96.47 percent in the same period last year. That has resulted in contraction of 316 basis points in operating margins to 0.37 percent.
The company reported operating income of $19.36 million, compared with $187.71 million in the previous year period.
Ron Sargent, Staples' chairman and chief executive officer said, ''We're accelerating growth in our delivery businesses as customers turn to Staples for more products beyond office supplies. At the same time, we have more work to do to stabilize our retail business, and we’re taking action to improve customer traffic, reduce expenses and close underperforming stores.''
For third quarter the company expects diluted non-GAAP earnings per share in the range of $0.34 to $0.39.
The company expects to record pre-tax charges in the range of $40 million to $75 million associated with restructuring and other related activities during the third quarter of 2014. For the full year, the company expects total pre-tax restructuring and other related charges in the range of $230 million to $310 million.
For full year, the company expects to generate more than $600 million of free cash flow. The company's free cash flow guidance reflects an expected use of cash in the range of $60 million to $100 million associated with its 2014 restructuring plan, as well an expected use of cash in the range of $50 million to $100 million related to its 2012 and 2013 restructuring plans.
Cash Flow
Staples has generated cash of $303.58 million from operating activities during the first half, down 12.66 percent or $43.99 million when compared with the last year period. The company has generated 2.79 cents of operating cash flow in every sales dollar for the first half, down from 3.12 cents in the same period last year.
The company has spent $124.30 million cash to meet investing activities during the first half, as against cash outgo of $149.95 million in the last year period. It has made net capital expenditure of $106.60 million during the first half, which was lower by 7.82 percent or $9.05 million, from a year ago.
The company's free cash flow accounted for 64.89 percent of operating cash flow for the first half, compared with 66.73 percent in the last year period.
The company has spent $260.80 million cash to meet financing activities during the first half, as against cash outgo of $319.58 million in the last year period. It has made net repayment of $0.60 million debt during the first half. It has spent net of $106.60 million on repurchase of common stocks.
The company's cash dividend payment decreased 2.00 percent or $3.14 million to $153.78 million. Dividend payment accounted for 50.66 percent of operating cash flow for the first half, compared with 45.15 percent in the same period previous year.
As on Aug. 02, 2014, the company's cash balance stood at $417.21 million, down 64.84 percent or $769.41 million from Aug. 03, 2013.
Working Capital
Staples has witnessed an increase in the working capital over the last one year. The company's working capital stood at $1912.83 million as at Aug. 02, 2014, up $86 million or 4.71 percent from $1826.83 million on Aug. 03, 2013. It registered an increase in current ratio to 1.54 as at Aug. 02, 2014 from 1.43 on Aug. 03, 2013.
Debt Position
Staples has witnessed a decline in the total debt over the last one year. As on Aug. 02, 2014, total debt stood at $1127.52 million, down 42.62 percent or $837.54 million, from Aug. 03, 2013.
The company's total debt was 10 percent of total assets as on Aug. 02, 2014, compared with 16.38 percent on Aug. 03, 2013.
Interest coverage ratio, which determines how easily a company can pay interest expenses on outstanding debt, has declined to 1.53 from 6.20 in the same period last year.
Shares of the company gained $0.09 or 0.78 percent to close at $11.62 on Tuesday.
