UPDATE 3-Staples profit tops Street view; outlook tepid

* Q1 adj EPS $0.28 vs Wall Street view $0.27

* Sales rise 4 pct to $6.06 billion

* Sees Q2 adj. EPS $0.18 to $0.20 vs Street view $0.20

* Sees FY adj. EPS $1.25 to $1.33 vs Street view $1.33

* Shares up 0.5 pct
(Adds executive comments, shares, byline)

By Dhanya Skariachan

NEW YORK, May 20 (BestGrowthStock) – Top U.S. office products
retailer Staples Inc (SPLS.O: ) gave a lackluster outlook for the
rest of its fiscal year and reinforced growing industry
expectations for a slower U.S. economic recovery.

Staples, which posted a slightly better-than-expected
quarterly profit on Thursday, said it expected sales to rise at
a low-single-digit percentage range for the year, with earnings
of $1.25 to $1.33 a share before items.

Analysts on average were expecting a profit of $1.33 a
share, according to Thomson Reuters I/B/E/S.

Many investors look at office supplies retailers as a
barometer of economic health since demand for their products is
closely tied to white-collar employment rates.

On a conference call, Staples executives said they were not
betting on a “big time recovery” but were looking for slow and
steady progress instead.

The news came less than a month after smaller rival
OfficeMax (OMX.N: ) said it expected the U.S. economy to recover
more toward the back half of 2010. [ID:nN28110661]

But quarterly numbers from No. 2 U.S. office supplies
retailer Office Depot (ODP.N: ) had depicted a weaker market
after store closures, higher advertising expenses and weakness
in California weighed on its profits. [ID:nN27228444]

In the current quarter, Staples expects sales to rise in
the low-single digits and earnings of 18 cents to 20 cents a
share before items. Analysts had forecast 20 cents a share.

Staples shares rose 0.5 percent, compared with a 2.6
percent drop in the Standard & Poor’s 500 Index (.SPX: ).
OfficeMax shares fell 5.5 percent and Office Depot shed 4.5
percent.

EUROPEAN WORRIES

While Staples’ European retail business has remained weak,
it expects limited impact from upcoming budget cuts in some
southern European countries as it did not have a “huge”
government business there.

It expects Europe to be more of a margin story and less of
a sales growth story this year.

In the latest first quarter that ended on May 1, Staples
earned $188.8 million, or 26 cents a share, up from $143
million, or 20 cents a share, a year earlier.

Excluding items, the company earned 28 cents a share,
beating the analysts’ average forecast of 27 cents, according
to Thomson Reuters I/B/E/S.

Sales rose 4 percent to $6.06 billion. Sales at Staples’
North American stores open at least a year rose 1 percent.

In its North American delivery business that caters mainly
to business clients, the company gained more customers but
existing customers purchased less.

Stock Market Investing

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn and
Maureen Bavdek)

UPDATE 3-Staples profit tops Street view; outlook tepid