Part 33 (1/2)

Ticker sy: BBB Value Line financial strength rating: A+ Current yield: 16

Company Profile

Staples, Inc, launched the office supplies superstore industry with the opening of its first store in Brighton (near Boston), Massachusetts, in May 1986 Its goal was to provide small business owners the sae corporations Staples is now a 24 billion retailer of office supplies, business services, furniture, and technology to consuhout North and South Aest operator of office products superstores in the world, with 2,243 stores of all types

The coments: North American Retail, North American Delivery, and International Operations The coment consists of the company's US and Canadian business units that sell office products, supplies, and services

The North Ament consists of the co, and Internet business units that sell and deliver office products, supplies, and services directly to custoe, delivery-oriented office products distributor acquired in 2008

International Operations has more than 300 retail stores in seven countries, but reaches further with catalog and delivery options into seventeen countries, soh joint ventures The coentina, and Taiwan a its own brand and set of branded products for years, and is gaining traction on that brand, selling through Safeway stores and other chains

Financial Highlights, Fiscal Year 2010

Cost-cutting e and small, took its toll in FY2009, especially on the newly acquired Corporate Express business Although FY2010 brought lingering cost-cutting effects on the business, for the most part the year was a different story The Delivery division, which includes Corporate Express, picked up and was delivering low single-digit gains by the end of the year Although the ti of the Corporate Express acquisition, which added about 5 billion annually to the top line, could have been better, the integration ell and was considered to be less expensive than originally projected

The cos of 121 per share, bothfor 255 billion in FY2011, delivering earnings in the 150160 range, a healthy gain based on improved economic conditions, success with Staples-branded products, rollout of Tech Services at some stores, lower interest costs and tax rates, and a ins

Reasons to Buy

In our view, Staples is still the best brand in this business, and the coe that brand, including the clever ”That Was Easy” advertising caives the coes supply chain and purchasing power advantages, and at least at present, offers broader service than its coer financials than its competition Finally, we like the international expansion opportunities; the co and likely successful road in front of it

Reasons for Caution

Consu will likely remain soft for some time Saturation in North A cities and suburbs have all the office supply superstore coverage they need This is especially true in a soft market with competition from the likes of Wal-Mart and warehouse club stores Finally, we've seen active pursuit of acquisitions in the past, and are wary of overdependence on acquisitions going forward

AGGRESSIVE GROWTH

Starbucks Corporation

Ticker sy: BBB+ Value Line financial strength rating: A Current yield: 16

Company Profile

Starbucks Corporation, for retailer, roaster, and brand of specialty coffee in the world The coh its retailers, its specialty sales group, and supermarkets The company has 6,706 company-owned stores in the United States and 2,184 in international markets, in addition to 88,139 licensed stores ide Retail sales constitute the bulk of its revenue Note that the company-owned store count is actually down, as the co to close 600 low-perforutsy move in the retail sector Note also that the company does not franchise its storesall are either company owned or operated by licensees in special venues like airports, college campuses, and other places where access is restricted

Starbucks also has joint ventures with Pepsi-Cola and Dreyer's to develop bottled coffee drinks and coffee-flavored ice creams All channels outside the company-operated retail stores are collectively known as specialty operations

The co retailer and brand of coffee in each of its targeta unique Starbucks experience, which the company defines as a third place beyond home and work The ”experience” is built upon superior customer service and a clean, well-maintained retail store that reflects the personality of the coree of customer loyalty

The company's specialty operations strive to develop the Starbucks brand outside the coh a nuy to reach custoy eements, foodservice accounts, and other initiatives related to the company's core businesses