Office Supply Industry Indicates Improving Economy

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The demand for office products is another quiet indicator of the health of the economy. When companies have good revenue, they buy bigger ticket office machinery and supplies. When companies are suffering the demand for supplies slips as companies reduce staff and office expenses. The health of the economy can be seen in the earnings of the three largest office supply companies.

Staples, Inc. (NASDAQ: SPLS) recently announced a quarterly cash dividend on common stock of $0.11 per share, an increase of 10% over the previous quarterly cash dividend of $0.10 per share. This comes on the heels of a reported 2011 fourth quarter net income of about $284 million, up 3% from the same quarter in 2010. For the quarter ended Jan. 28 (Q4), Staples met expectations on revenues and on earnings per share.

The company's Q4 earnings rose 3.2% as North American numbers offset continued weakness in Europe and Australia. Staples saw a 4.6% decline in international sales, with a 9% slump in European same-store sales.

OfficeMax (NYSE: OMX) reported earnings on Feb. 23. For the 2011 Q4, the company beat expectations for both revenue and on earnings per share. The company brought in 3.9% more revenue, up to $1.84 billion. The quarterly earnings of 17 cents improved one cent over the prior year quarter.

In light of the modest improvements, the company continues to reposition itself and take steps toward better margins by 2015. The company is focused on innovative products, optimal store locations, and closing under-performing stores in order to improve sales. The company has also entered into a retail partnership with RadioShack. OfficeMax now sells mobile products and accessories from RadioShack in San Francisco area stores, and RadioShack is offering more consumer electronics in its stores.

Smaller rival Office Depot (NYSE: ODP) also met expectations on revenues and beat expectations on earnings per share, a good sign overall for the office supply industry. The company saw a fourth quarter revenue of $2.97 billion, and GAAP reported sales were 0.3% higher.

Like Staples, Office Depot Inc. also noted difficulties in the European market.

The results from these three companies further back up the general feeling that the economy has begun to modestly improve in the US, while echoing the continued difficulties in Europe. All three companies are looking to improve margins and revenue in the coming quarters in the US.

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