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Staples sales fall for eighth straight quarter

A family leaves the Staples store in Broomfield, Colorado August 17, 2011 as the back-to-school shopping season begins. REUTERS/Rick Wilking

By Sruthi Ramakrishnan

(Reuters) - Staples Inc (SPLS.O) reported its eighth straight decline in quarterly sales, highlighting the company's need to seal its deal to buy Office Depot Inc (ODP.O) as competition in the office supplies market intensifies.

Staples struck a deal in February to buy Office Depot for $6.3 billion to better compete against Wal-Mart Stores Inc (WMT.N) and Amazon.com Inc (AMZN.O), which have been taking business from traditional sellers of paper, pens and toner.

The deal is working its way through the antitrust process but is widely expected to win approval.

"We are very pleased with the progress we are making on the transaction," Staples Chief Executive Ron Sargent said on a conference call on Friday.

Staples shares were down 2.4 percent in early trading. Shares of Office Depot, which reported lower-than-expected quarterly sales last week, were down 0.5 percent.

Staples blamed its lower-than-expected fourth-quarter sales on a strong dollar as well as weak demand for computers and related accessories.

The company also said that sales for the current quarter ending April would be lower than the $5.65 billion it reported for the same period a year earlier.

Staples took a pre-tax charge of $410 million for the impairment of goodwill in its international operations, resulting in a net loss attributable to the company of $260.4 million, or 41 cents per share.

That compares with a profit of $212.4 million, or 33 cents per share, a year earlier.

Excluding items, Staples earned 31 cents per share, a cent above the average analyst estimate.

"One of the biggest takeaways from Staples' earnings is the importance of a merger with Office Depot to get this company back to underlying EBIT (earnings before interest and tax) growth," Credit Suisse analyst Seth Sigman wrote in a note.

Total sales fell 3.7 percent to $5.66 billion in the quarter. Analysts on average had expected $5.76 billion, according to Thomson Reuters I/B/E/S.

Staples forecast adjusted earnings of 16-18 cents per share for first quarter ending April, in line with the average analyst estimate. The forecast excludes costs related to the Office Depot deal.

Staples shares were down 2 percent at $16.14 about 30 minutes after the start of trading. Up to Thursday's close, the shares had fallen 13 percent since the Office Depot deal was announced on Feb. 4.

(Reporting by Sruthi Ramakrishnan and Yashaswini Swamynathan in Bengaluru; Editing by Maju Samuel and Saumyadeb Chakrabarty)