Staples Inc reported a better-than-expected quarterly profit on currency benefits and an uptick in sales to its business customers in North America, prompting the largest U.S. office supply chain to raise its profit outlook.
The news boosted Staples' shares by 8.3 percent to $15.40 in premarket trading.
Smaller rivals have also shown some improvement on the profit front lately, with Office Depot Inc reporting a smaller-than-expected quarterly loss and OfficeMax Inc posting better-than-expected earnings.
Many investors look at office supply retailers as a good gauge of the economy, as demand for their products is closely tied to white-collar employment rates. Sales at all three chains have suffered in the weak U.S. economy, and the companies continue to keep a tight rein on costs to offset weak demand.
For the full year, Staples continues to see sales rising at a low-single-digit percentage rate.
Its net income rose to $176.4 million, or 25 cents a share, in the second quarter ended July 30, from $129.8 million, or 18 cents a share, a year earlier.
Excluding a tax refund, it earned 22 cents a share. On that basis, analysts on average were expecting 19 cents a share, according to Thomson Reuters I/B/E/S.
Sales rose 5.2 percent to $5.82 billion, while analysts had expected $5.65 billion.
North American Delivery sales for the second quarter were $2.4 billion, an increase of 3.1 percent from the year-ago period. The North American Delivery unit caters mainly to business customers.
BACK-TO-SCHOOL IN FOCUS
Same-store sales, or sales at Staples stores open at least a year, were flat in the second quarter, signaling a soft start to the key back-to-school selling season.
OfficeMax's comments earlier this month also pointed in that direction.
While it is early in the back-to-school season, we have seen softer traffic trends versus the prior year, OfficeMax Chief Executive Officer Ravi Saligram said on August 2.
Staples, Office Depot and OfficeMax face a tough selling environment as budget-conscious shoppers now buy school supplies at mass merchants, dollar stores, drugstores and pretty much anywhere they can find decent bargains.
For the full year, Staples now sees net earnings of $1.42 a share to $1.48 a share. In May the company had cut its forecast to a range of $1.35 to $1.45 a share.
Excluding the tax refund in the second quarter, Staples sees full-year earnings of $1.39 a share to $1.45 a share.
(Reporting by Dhanya Skariachan; editing by John Wallace and Gerald E. McCormick)