CHICAGO, May 23 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
rated Staples' $175 million 18-month floating-rate notes 'BBB+'
(Triple-B-Plus). The rating reflects the pari passu status with other senior
debt in the capital structure of the company. At the same time, DCR reaffirms
its 'BBB+' (Triple-B-Plus) rating on Staples bank credit facility and senior
notes. The Rating Outlook for Staples is Stable.
Staples' operating results continue to improve with comparable store sales
increasing 9 percent for fiscal year 1999 and increasing by 10 percent for the
first quarter of 2000. Fixed-charge coverage ratios improved during fiscal
year 1999 to 5.3 times from 4.8 times a result of lower interest expense
associated to the conversion of subordinated notes into equity as well as
higher EBITDA. Despite increases in interest expense in the near term, DCR
anticipates that the company will be able to maintain a fixed-charge coverage
ratio of approximately 5 times going forward.
The company continues its growth plan, opening 69 new stores during the
first quarter of fiscal year 2000 with a plan to open approximately 170 stores
for the full year. The company continues to develop its warehouse and
distribution network as well as invest in Staples.com, the company's on-line
e-commerce effort.
While DCR notes that the company is well-positioned for growth within the
office supply industry, keys to maintaining the rating will be solid financial
management of its balance sheet and increasing cash flow. The company appears
to be on track in maintaining new growth as it builds out its store base,
however, competition for real estate and aggressive investment in e-commerce
may temper success.
Staples operates in the $200 billion office supply industry, and
represents just 4.5 percent of the North American market. The company
operates 1,200 retail stores in the United States and Europe. Other
businesses include mail order catalogs, e-commerce and contract business.
For additional research on Staples, visit DCR's web site at
http://www.dcrco.com (Quick Search: Staples). DCR's research is also
available on Bloomberg at DCR and First Call's BondCall Direct/Research
Direct at http://www.firstcall.com, as well as through other third party
providers.
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
http://www.firstcall.com
CONTACT:
Sheila M. McNeely, 312-368-3185,
mcneely@dcrco.com, or Thomas P. Razukas, CFA, 212-908-0223,
razukas@dcrco.com, both of DCR
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