Staples 2007 Annual Report Download - page 102

STAPLES, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
segment income to consolidated income before income taxes and minority interest in Note K in the Notes to the
Consolidated Financial Statements):
2007 2006
(Amounts in thousands) Increase From Increase From
Sales 2007 2006 2005 Prior Year Prior Year
North American Retail ................. $10,020,941 $ 9,893,107 $ 9,015,851 1.3% 9.7%
North American Delivery ............... 6,614,202 5,908,872 4,967,323 11.9% 19.0%
International Operations ................ 2,737,539 2,358,810 2,095,678 16.1% 12.6%
Total Segment Sales .................. $19,372,682 $18,160,789 $16,078,852 6.7% 12.9%
2007 2006 2005
(Amounts in thousands) % of % of % of
Business Unit Income 2007 2006 2005 Sales Sales Sales
North American Retail .......... $ 949,038 $ 957,386 $ 842,995 9.5% 9.7% 9.4%
North American Delivery ........ 712,558 623,908 507,276 10.8% 10.6% 10.2%
International Operations ......... 97,996 50,511 13,616 3.6% 2.1% 0.6%
Business Unit Income ......... $1,759,592 $1,631,805 $1,363,887 9.1% 9.0% 8.5%
Stock-based compensation ........ (173,343) (157,907) (129,806) 0.9% 0.9% 0.8%
Total Segment Income ......... $1,586,249 $1,473,898 $1,234,081 8.2% 8.1% 7.7%
Stores Stores
Open at Net Open at
Beginning Stores Stores Stores End
Store Activity of Period Opened Acquired Closed of Period
2005 North American Retail .......................... 1,426 99 — 3 1,522
2005 International Operations ......................... 254 8 — 4 258
2005 Total ........................................ 1,680 107 — 7 1,780
2006 North American Retail .......................... 1,522 99 — 1 1,620
2006 International Operations ......................... 258 6 — — 264
2006 Total ........................................ 1,780 105 — 1 1,884
2007 North American Retail .......................... 1,620 120 — 2 1,738
2007 International Operations ......................... 264 27 12 3 300
2007 Total ........................................ 1,884 147 12 5 2,038
North American Retail: Sales increased 1.3% in fiscal 2007 and 9.7% in fiscal 2006. Sales for 2006 include
$209.1 million related to the additional week in 2006. Excluding the additional week in fiscal 2006, sales increased 3.5%
in 2007 and 7.4% in 2006. Comparable store sales in North America decreased 3% in 2007 and increased 3% in 2006.
Our sales growth in fiscal 2007 primarily reflects non-comparable store sales, partially offset by the decrease in
comparable store sales. Our sales growth for fiscal 2006 primarily reflects non-comparable store sales as well as the
increase in comparable store sales. The increase in sales also includes the positive impact of the Canadian exchange rate
to the U.S. dollar of $161 million in 2007 and $111 million in 2006. Our comparable sales decrease in 2007 reflects
negative performance in business machines, furniture and core office supplies, partially offset by positive performance in
computers and our copy and print center business. Our comparable sales growth in 2006 reflects positive performance in
office supplies, computers, our copy and print business, ink and toner, and computer peripherals.
Business unit income as a percentage of sales decreased to 9.5% in 2007 from 9.7% in 2006 and 9.4% in 2005. The
decrease in business unit income for 2007 primarily reflects deleverage in fixed costs resulting from a decrease in
comparable store sales as well as the additional leverage of the 53rd week in 2006, partially offset by decreased variable
compensation, an increase in product margin rate, including increased sales in higher margin categories such as Staples
brand products and copy and print services, as well as our focus on expense control. The increase in business unit income
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