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Framingham, Mass. Staples Inc. reported Tuesday that third-quarter profits dropped 43% and attributed the slide to hefty restructuring and acquisition charges as well as customer cut-backs in the face of a declining economy.
For the three months ending Nov. 1, Staples earned $156.7 million, down from $274.5 million during the same period last year.
Restructuring and acquisition charges included $124 million to discontinue the use of trade names Staples obtained from a 2002 acquisition, $9 million from its acquisition of Dutch office-supply chain Corporate Express NV and $57 million for tax-planning strategies related to the $2.7 billion acquisition of Corporate Express in July.
Sales rose 35% to $7 billion from $5.17 billion a year ago. Analysts predicted revenue of $7.03 billion.
The boost in revenue came from the delivery and international divisions, which recorded increases in revenue largely due to sales from Corporate Express.
North American retail sales fell 6%; same-store sales declined 8%.
The company said the dip reflected a decline in average order size, slower traffic and weakness in computers, accessories, business machines and furniture sales.
"The economic environment remains challenging and we saw particular weakness during October at the height of the financial crisis," chairman and CEO Ron Sargent told investors during a conference call Tuesday morning.
Because of the volatile economy, Staples could not provide a specific outlook for the fourth quarter or the following year, CFO John Mahoney said on a conference call.
The strengthening of the U.S. dollar, which reduces the value of overseas sales, will hurt fourth-quarter earnings and probably "remain a drag" on profits early next year, the company said.