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May 15, 2000

Staples Retail and Delivery Reports 10 Percent Same-Store-Sales for First Quarter

COMPANY PRESS RELEASE: Staples Inc. the pioneer of the office superstore industry, today announced that its Retail and Delivery business earned net income of $63.3 million, or $.14 per common share, on a diluted basis, for the first quarter which ended April 29, 2000, compared with $52.4 million or $.11 per common share, on a diluted basis, for the prior year.

By CBR Staff Writer

Staples Retail and Delivery results exclude the retained interest in Staples.com and an adjustment to the store closure charge taken in the fourth quarter 1998.

We’ve proven, once again, that there is tremendous room for profitable growth in the office supply superstore business with our 29th consecutive quarter of meeting or beating analysts’ expectations, said Staples Chairman and Chief Executive Officer Thomas G. Stemberg. Staples’ outstanding first quarter results were predicated on our solid business strategy and ability to execute, merchandise, enhance our distribution capabilities and locate the best real estate sites for our stores.

Sales for the quarter rose 20 percent to $2.48 billion from $2.06 billion reported for the same period last year. Comparable sales for the 976 stores open for more than one year and delivery hubs increased 10 percent for the first quarter. Sales per store week improved slightly, 1.52 percent, despite the record number of stores the company opened during the quarter.

Gross margins for the quarter improved 10 basis points to 24.0 percent over the same period in the prior year, and return on net assets improved to 13.2 percent, 120 basis points over the same quarter in the prior year.

Staples opened 69 new stores this quarter, ahead of its office superstore competitors, and is on track to open 170 new stores in fiscal year 2000. The company also reinvested in its business with the first phase launch of Staplespartners.com, a Web-based technology that will enable vendors to have better visibility into Staples’ sales data and inventory levels to improve fulfillment and delivery to the company. This and other supply chain initiatives, such as the new retail distribution center in Terre Haute, Ind., have resulted in lower distribution costs, lower inventory levels and better in-store stock levels in the retail business.

Recent multi-channel fulfillment enhancements, including the addition of a new 330,000-square-foot facility in Ontario, Calif., and an expanded delivery fleet – to 500 trucks by year end – have allowed Staples to better serve delivery customers, improve service and reduce distribution costs in its contract, catalog and e-commerce operations.

Staples’ European operations continued on an upward trend, reporting a 16 percent same-store-sales increase, and management believes the company is well positioned for continued growth overseas. The company also has benefited from the 42 store locations it acquired from Metro last year.

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