updated 8/16/2005 5:48:44 PM ET 2005-08-16T21:48:44

Staples Inc. said Tuesday its second-quarter profit rose 20 percent as sales growth in the office products retailer's delivery business continued to outpace modest gains in its stores.

Staples reported net income for the May-July period of $147.2 million, or 20 cents per share, compared with a profit in last year's second quarter of $122.5 million, or 16 cents per share. Revenue rose 12 percent to $3.47 billion from $3.09 billion a year ago.

The most recent quarter's profit performance beat by a penny the consensus forecast of analysts surveyed by Thomson Financial, who on average expected a profit of 19 cents per share.

In line with recent quarters, Staples' most rapid growth came in its North American office products delivery business, where the Framingham-based company posted 17 percent sales growth.

Sales at North American retail stores open at least a year increased 3 percent, driven in part by growth in copying services and strong sales of high-end items like digital cameras and portable computers. Staples posted a 9 percent sales gain counting all of its North American stores, including recently opened locations.

Staples opened 14 new stores and closed one store in the U.S., and opened seven in Canada during the most-recent quarter. The company now operates 1,716 stores worldwide. Those include 15 new stores that have been added recently through Staples' entry into the Chicago-area market, where the company said sales continue to exceed expectations.

International retail sales climbed 15 percent last quarter, but just 2 percent when counting the effects of foreign currency fluctuations and acquisitions.

Lagging sales in Europe hurt Staples' international results. Chairman and chief executive Ron Sargent blamed Europe's slow economy and the costs of integrating some of Staples' new European operations and remodeling stores _ investments he said would position Staples for long-term growth.

Sargent said a healthy market for office products overall is giving Staples "the flexibility to invest in our international operations, where we're just scratching the surface of market opportunity."

The 19-year-old company is now in 21 countries, with Staples' recent acquisitions focusing on growth in Europe and China.

Staples, whose chief domestic rivals are Office Depot and OfficeMax, said it expects its third-quarter profit to be in line with analysts' estimates. Analysts surveyed by Thomson Financial expect a per-share profit of 32 cents per share.

For the full year, Staples forecasts its per-share profit will increase "in the high teens" on a percentage basis. That is in line with analysts' expectations for a full-year per-share profit of $1.10.

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