Staples, Inc. (Staples), a supplier of office products, has reported sales of $23.1 billion for the year-end 2008, compared with the sales of $19.4 billion in the previous year-end. It also reported a net income of $805.3 million for the year-end 2008, or $1.13 per diluted share, for the year-end 2008, compared with the net income of $995.7 million, or $1.38 per diluted share, in the previous year-end.

Total company sales increased 16% to $6.2 billion compared to the fourth quarter of 2007. Excluding the impact of Corporate Express, total company sales for the fourth quarter 2008 decreased 14% to $4.6 billion in US dollars, or 10% in local currency, compared to the fourth quarter of 2007. Net income for the fourth quarter declined 14% year over year to $286 million, and diluted earnings per share, on a GAAP basis, decreased 15% to $0.40 from the $0.47 achieved in the fourth quarter of last year.

Fourth quarter 2008 Performance

The company recorded a non-cash, pre-tax charge of $22 million related to software no longer expected to be used as a result of the acquisition of Corporate Express. The company also recorded pre-tax integration and restructuring expense of $19 million related to Corporate Express. Additionally, the company finalized its tax planning strategies to optimize the benefits of the net operating losses of Corporate Express. As a result, the company reversed the previously disclosed non-cash charge of $57 million incurred during the third quarter of 2008, resulting in a one-time decrease to the company’s effective tax rate.

Excluding the impact of these special items related to the acquisition of Corporate Express, adjusted earnings per share, on a diluted basis, decreased 23% to $0.36 compared to the fourth quarter of 2007.

Including $910 million of Corporate Express sales, North American Delivery grew sales 43% to $2.5 billion. Excluding the impact of Corporate Express, North American Delivery sales declined 10% to $1.6 billion in US dollars, or 9% in local currency, reflecting lower spend per existing customer, particularly in durable categories such as furniture and technology, somewhat offset by growth in paper and ink.

North American Retail sales were $2.4 billion, declining 14% in US dollars, or 10% in local currency, compared to the fourth quarter of 2007. Comparable store sales decreased 13% versus the fourth quarter of 2007, reflecting declines in average order size and customer traffic, as well as weakness in durables, including computers and accessories, business machines, and furniture. Positive comparable store sales in ink, and slightly negative comparable store sales in consumables, partially offset this decline.

Including $700 million of Corporate Express sales, International sales increased 62% to $1.3 billion. Excluding the impact of Corporate Express, International sales declined 24% in US dollars, or 11% in local currency, compared to the fourth quarter of 2007. Comparable store sales in Europe decreased 10% versus the same period in 2007, as a result of weakness in average order size and customer traffic.

Full Year 2008 Performance

Excluding the impact of Corporate Express, total company sales decreased three% to $18.8 billion compared to the full year 2007. Net income declined 19% year over year to $805 million, and diluted earnings per share, on a GAAP basis, decreased 18% to $1.13 from the $1.38 achieved last year.

In addition to the special items the company recorded during the fourth quarter of 2008, the company also recorded previously announced special charges during the third quarter of 2008, including a non-cash, pretax charge of $124 million, reflecting the company’s plan to discontinue the use of trade names obtained from the 2002 Guilbert acquisition, a pre-tax integration and restructuring expense of $9 million related to Corporate Express, as well as a non-cash charge of $57 million as a result of the company’s evolving tax planning strategies to optimize the benefits of the net operating losses of Corporate Express, which was reversed during the fourth quarter of 2008. Excluding the special items from the third and fourth quarters of 2008, as well as the pre-tax charge of $38 million, or $0.04 per diluted share, related to the settlement of California wage and hour class action litigation realized during the third quarter of 2007, adjusted earnings per share, on a diluted basis, declined nine% to $1.29 for the full year 2008, from the $1.42 achieved in the full year 2007.

Including $2.3 billion of Corporate Express sales, North American Delivery sales grew 35% to $8.9 billion for the full year 2008. Excluding the impact of Corporate Express, North American Delivery sales were flat versus 2007 at $6.6 billion. North American Retail sales decreased five% for the full year 2008 to $9.5 billion, and comparable store sales decreased nine% versus 2007. Including $1.9 billion of Corporate Express sales, International sales increased 70% to $4.7 billion for the full year 2008. Excluding the impact of Corporate Express, International sales increased one% in US dollars and were flat in local currency compared to the full year 2007. Comparable store sales in Europe decreased five% versus 2007.

“While 2008 was incredibly exciting because of the Corporate Express acquisition, it was also the most challenging year in our company’s history,” said Ron Sargent, Staples’ chairman and chief executive officer. “Although we were not satisfied with our top-line performance, we did a great job controlling expenses to achieve strong operating margins, tightening our capital spend, and managing inventory. I’m very proud of our team’s ability to generate record free cash flow of more than $1.3 billion despite the challenges we faced.”