STAPLES INC - 10-K Annual Report

ý Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

o Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o

The aggregate market value of the voting stock held by non-affiliates of the registrant, based on the last sale price of Staples' common stock on August 1, 2003, as reported by Nasdaq, was approximately $9.9 billion. In determining the market value of non-affiliate voting stock, shares of Staples' common stock beneficially owned by each executive officer and director have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The registrant had 499,339,381 shares of Staples' common stock, par value $.0006, outstanding as of March 2, 2004.

Listed below is the document incorporated by reference and the part of the Form 10-K into which the document is incorporated:

Portions of the Proxy Statement for the 2004 Annual Meeting of Stockholders

Part III

Staples, Inc. and subsidiaries ("We", "Staples" or "the Company") pioneered the office products superstore concept and is a leading office products distributor. We opened the first office products superstore in Brighton, Massachusetts in 1986 to serve the needs of small businesses. The office products industry has experienced significant growth since 1986 as the industry has expanded to include a variety of retailers, dealers and distributors, including other high-volume office supply chains.

We operate three business segments: North American Retail, North American Delivery and European Operations. Our North American Retail segment consists of U.S. and Canadian business units that, at the end of fiscal 2003, sold office products and services through 1,358 retail stores. Our North American Delivery segment consists of U.S. and Canadian business units that sell and deliver office products and services directly to customers. Our European Operations segment consists of our business units that, at the end of fiscal 2003, sold office products and services through 201 retail stores in the United Kingdom, Germany, the Netherlands, Portugal, and Belgium and sell and deliver office products and services directly to customers throughout the United Kingdom, Germany, France, Belgium, Spain, Italy and Sweden. Additional information regarding our operating segments is presented in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in this Annual Report on Form 10-K, and financial information regarding these segments is provided in Note N in the Notes to Consolidated Financial Statements contained in this Annual Report on Form 10-K.

We view the office products market as a large, diversified market for office supplies and services, business machines, computers and related products, and office furniture. We estimate the segment of the overall market we target to be approximately $160 billion in North America and approximately $65 billion in Europe. Although there are no clear demarcations among customer groups, we target four principal end-user groups: power users (customers spending over $500 per year in office products excluding computers and furniture; primarily home-based businesses, home offices and teachers); small businesses and organizations with up to 50 office workers; medium-size businesses and organizations with between 50 and 500 office workers; and large businesses and organizations with more than 500 office workers. We effectively reach each sector of the office products market through three sales channels designed to be convenient to the needs of our customers: retail stores, catalog and internet. Our ability to address all four major end-user groups increases and diversifies our available market opportunities; increases awareness of the Staples name among customers in all four end-user groups, who often shop across multiple sales channels; and allows us to enjoy a number of important economies of scale, such as increased buying power, enhanced efficiencies in distribution and advertising, and improved capacity to leverage general and administrative functions.

Our strategy is to differentiate ourselves from our competition through a combination of our Back to Brighton plan, announced in 2001, and our new "Easy" brand promise. The three main elements of Back to Brighton are driving profitable sales growth, improving profit margins and increasing asset productivity. Back to Brighton has brought a renewed focus to the more profitable small business customers and power users, versus less profitable casual consumers, through changes in merchandise mix, marketing and customer service. We improved our merchandise mix with an increase in products directed at small business customers and power users and a decrease in products directed at casual consumers. We realigned our marketing efforts to focus on small business customers and power users with an increased emphasis on direct mail and customer loyalty programs and with less emphasis on circulars. To improve our customer service, we expanded our training of sales associates, added labor hours to certain store departments and changed our associate bonus plan. Back to Brighton continues to drive our performance and shape our strategy. In 2003, we launched our new brand promise, "We make buying office products easy," in response to customer research which showed this to be an effective way to differentiate us from our competitors. We implemented initiatives in both retail and delivery to improve the customer experience, infused the new brand personality in all of our marketing vehicles and stores, actively promoted our new advertising tagline "that was easy" and increased the quality and value of our Staples brand products. This addition to our core strategy reflects our commitment to making it easy for our customers to shop, both in terms of shopping experience and product offering.

Our North American Retail segment, consisting of 1,358 stores throughout the United States and Canada at the end of fiscal 2003, generated the majority of our sales and profits during fiscal 2003. Our North American retail stores are located in 46 states, the District of Columbia and 10 Canadian provinces in both major metropolitan markets and smaller markets. Our retail operations focus on serving the needs of small businesses and power users.

Our strategy for our North American superstores focuses on several key objectives: offer an easy-to-shop store environment with quality products that are in-stock and easy to find, with fast checkout and courteous, helpful and knowledgeable sales associates; provide superior value to our customers through a combination of everyday low prices, a broad selection of products, convenient store locations and hassle-free returns; and reduce operating costs to the lowest level consistent with providing quality merchandise and service.

As part of our strategy of delivering on our new "Easy" brand promise, we focus on several key categories for which our customers rely on us to be an authority, such as ink and toner, paper, business machines and copy and print services. For instance, to make it easier to shop for printer cartridges, we expanded our cartridge offering and made them more accessible to our customers. We also placed cartridges, paper and cables next to business machines to make it easier to buy these related products.

We have many other initiatives intended to make shopping easy for our customers. Related items are typically grouped together for customer convenience. Associates in our stores are available to consult on purchases, particularly in our furniture, business machines and technology sections, where customers often need assistance in decision making. We also offer our retail customers the ability to make purchases on-line through in-store internet access points to acquire products that are not available in our stores. Customers can pay for these purchases at the register or through our internet access points and have the product delivered to their home or business.

During 2001, we introduced a redesigned layout of our stores called the "Dover" format. This design was created to improve the appeal of the store to the customer and to open up the interior of the store to give the customer a better view of our vast array of products. In addition, in fiscal 2002, we reduced the size of our new stores to 20,000 square feet from our previous 24,000 square foot store format. At January 31, 2004, we had 343 Dover stores in North America. We continue to improve our Dover store format through our focus on refinements in product placement, store design and adjacencies. In addition, we completed 450 more limited store remodels to benefit from some of the features of Dover at a much lower cost.

As part of our growth strategy in 2003, we opened five stores in a smaller format. These stores are 14,600 square feet in size and are designed to address smaller markets that we enter as well as smaller areas of potential in existing markets. We plan to open the majority of our stores in North America in the Dover format with some stores in smaller markets opening in the smaller format. We have also focused on improving under-performing stores in our retail portfolio. In 2003, we began redesigning some of the stores in our under-performing markets. These stores carry less inventory and benefit from a new labor model. We redesigned 21 stores in this format in 2003, and we plan on redesigning approximately 65 additional stores in 2004.

Our growth strategy is to expand our store base in a prudent fashion to produce strong sales and yield high returns on our investments. We believe that our network of stores and delivery businesses in various metropolitan markets enhances our profitability by allowing us to leverage marketing costs, distribution expense and supervision costs. In determining where to open new retail stores and actively market our catalog, we evaluate the concentration of small-and medium-sized businesses and organizations, the number of home offices, household income levels, the availability of quality real estate locations, competition and other factors. While most of our retail stores have been located in conventional strip shopping centers, we have also successfully converted non-retail properties to Staples stores. Although we often lease second-use properties, we have also entered into ground leases where we plan to build a store or arrange to have landlords construct freestanding buildings to our specifications. In addition, we have on numerous occasions acquired lease rights from prior tenants. We believe that this flexibility in selecting sites will assist us in securing additional locations in the challenging real estate markets in which we operate.

We plan to open approximately 95 new stores in North America in 2004, compared to 67 new stores in 2003 and 72 new stores in 2002. The growth program for fiscal 2004 will continue to focus primarily on existing markets as well as expansion into new markets where we see opportunities.

Our North American Delivery segment is comprised of three business units: "Staples Business Delivery," "Quill Corporation," and our contract stationer businesses, operating under the names "Staples National Advantage" and "Staples Business Advantage."

Staples Business Delivery: Our Staples Business Delivery operations combine the efforts of our direct mail catalog business, operating since 1990, and our Staples.com web site and Canadian Internet sites. Staples Business Delivery is designed to reach small businesses, home offices and power users seeking the convenience of free next business day delivery for orders over $50. Our Internet sites provide complete, on-site transaction processing for the purchase of over 70,000 office products and services. Delivery orders are shipped from our delivery fulfillment centers and are distributed through dedicated delivery hubs. In some markets, we also deliver products directly from our retail stores. We market Staples Business Delivery through direct mail catalogs, a telesales group focused on generating new accounts and penetrating existing accounts, and Internet and other broad-based media advertising.

Quill Corporation: Founded in 1956 and acquired by Staples in May 1998, Quill is a direct mail catalog business with a targeted approach to servicing the business product needs of more than one million small- and medium-sized businesses in the United States. Quill also sells office products using the Internet channel through Quill.com. To attract and retain its customers, Quill offers outstanding customer service, superior Quill brand products and special services. In July 2002, we acquired Medical Arts Press, Inc., or MAP, a leading direct marketer of specialized printed office products and practice-related supplies to medical offices, and established MAP as an operating division of Quill. Our acquisition of MAP provides us with an opportunity to sell traditional office products to MAP's customer base and expand Quill's and Staples' product offerings.

Staples National Advantage and Staples Business Advantage: Our contract stationer operations focus primarily on serving the needs of medium-sized to large businesses that often require more service than is provided by a traditional retail or mail order business. Through our contract sales force, we offer customized pricing, payment terms, usage reporting, the stocking of certain proprietary items and full service account management. Our contract stationer business is divided into two segments. Staples National Advantage is a nationwide contract stationer business selling to large multi-regional businesses. Staples Business Advantage primarily sells to medium-sized and large regional companies and has the flexibility to handle smaller accounts. We initially established the contract stationer business through acquisitions, and more recently have entered certain metropolitan markets through the expanded sales and distribution capabilities of Staples Business Advantage. StaplesLink.com, which offers the highest level of procurement functionality available on our web sites, meets the online procurement needs of our contract stationer customers.

Our strategies for North American Delivery focus on customer service and customer acquisition and retention to grow our delivery business and increase its profitability. We continue to focus on improving our perfect order metric, which measures the number of orders that we ship without error, and we implemented our easy returns policy in 2003, which provides customers with a more flexible and simple returns process. We are also working to enhance our distribution capabilities, opening new fulfillment centers and increasing the number of multi-channel fulfillment centers to enhance our ability to deliver overnight to more markets. We continue to expand our sales force as we increase our market share and drive penetration of existing customers. We have provided better training and improved the tools and offerings of our sales force to help increase customer retention. We also worked to reduce the number of small orders and increase the percentage of orders placed electronically.

As of January 31, 2004, we operated 201 retail stores in Europe. This includes 93 Staples stores in the United Kingdom, 53 Staples stores in Germany, 40 Office Centre stores in the Netherlands, 14 Staples Office Centre stores in Portugal and one Office Center store in Belgium. The Office Centre stores in the Netherlands and Belgium are different from a typical Staples store in that they generally have a business-oriented membership format similar in concept to many U.S. warehouse clubs. In fiscal 2003, we opened 17 stores in Europe, and we plan to open approximately 20 new stores in fiscal 2004. Our European Operations segment also includes delivery businesses operating under the Staples name in the United Kingdom and Germany and, as a result of recent acquisitions, a variety of brand names, including JPG and Bernard in France and Belgium, Sistemas Kalamazoo in Spain, Neat Ideas in the United Kingdom, MondOffice in Italy and Kontorslagret in Sweden. These recent acquisitions provided us with access to the fast growing office products mail order market in France, Belgium, Spain, Italy and Sweden and strengthened our position in the United Kingdom.

Europe represents an important opportunity for us. We believe that Europe is the second largest office products market in the world and relies more than North America on the delivery channel as opposed to the retail channel. Our retail business has experienced strong revenue growth and improved profitability over the last several years despite economic and regulatory challenges and a difficult real estate market. With our recent acquisitions in the delivery channel and our existing delivery business, we believe that we are well positioned for success as a multi-channel distributor of office products in Europe. To achieve this potential, we have made a number of changes to our European organization. For instance, our operations in Europe now have decentralized marketing and merchandising functions to respond better to the needs of the local markets. We have also established a European buying group to ensure that we get the benefit of our size as well as to share best practices and synergies across Europe, consistent with strategies being executed in our North American businesses.

We sell a wide variety of office supplies and services, business machines, computers and related products, and office furniture. While our buying and merchandising staff uses integrated computer systems to perform centrally the vast majority of our merchandise planning and product purchasing, some of our business units, particularly Quill, our Canadian operations and our multiple European businesses, leverage our global buying and merchandising staff along with their own staff to meet their more localized buying and merchandising needs.

We have approximately 8,000 stock keeping units (SKUs) stocked in each of our typical North American retail stores and approximately 15,000 SKUs stocked in our North American Delivery fulfillment centers. We also offer approximately 70,000 SKUs to our customers through the Internet, including Internet access points in our North American retail stores. In order to minimize unit costs and selling prices, we sell most products in multi-unit packages. The pack sizes are designed to be large enough to be cost effective without being burdensome to our small business customers.

Our product offering includes approximately 1,000 Staples brand products, which are primarily in consumables categories. In fiscal 2002, we expanded our Staples brand products program and de-emphasized controlled brands. As part of this effort, in 2003, we focused more on quality and value and plan to redesign our packaging in 2004. Staples brand products generally offer better gross margins than national brands and provide high quality and better value to our customers.

We also offer an array of services, including high-speed, color and self-service copying, other printing services, faxing and pack and ship services. The $15 billion copy and print market is highly fragmented, and we believe we have a significant opportunity to gain share in this market. We have focused on building customer awareness of our offerings in this area, increasing the training of our copy center associates and improving the quality in our copy and print centers.

The following table shows our sales by each major product line as a percentage of total sales for the periods indicated:

	Fiscal Year Ended
	January 31, 2004		February 1, 2003		February 2, 2002
Office supplies and services	41.5	%	41.7	%	40.8	%
Business machines and related products	30.3	%	30.5	%	29.8	%
Computers and related products	21.0	%	20.9	%	22.3	%
Office furniture	7.2	%	6.9	%	7.1	%

	100.0	%	100.0	%	100.0	%

We select our vendors based upon quality, price, delivery reliability and, where appropriate, customer brand recognition for all of our sales channels. As a result of the volume we purchase and our centralized distribution facilities, we are able to obtain favorable pricing from our vendors. In addition, in fiscal 2002, we began to use reverse on-line auctions, an Internet-based bidding process, to achieve savings through lower costs from our vendors on many of the items we use to operate our business and on some of the products we sell. We purchase products from several hundred vendors worldwide, and we believe that competitive sources of supply are available to us for substantially all of the products we carry.

Our strategy is to tailor our product mix to meet the needs of customers by regularly evaluating sales and profit performance for each of our SKUs. In connection with our Back to Brighton strategy, we reevaluated our retail product assortment to refocus on the more profitable small business customers and power users. This began with a SKU rationalization process aimed at maximizing our product assortment value by eliminating many of our low margin or slow moving, consumer-oriented SKUs. In 2003, as part of our merchandising strategy, we focused on portfolio management, the process by which we allocate our resources to various merchandise categories based on our growth objectives and roles for those categories. This process is a key strategy to drive sustainable growth and profitability.

We operate centrally located distribution and fulfillment centers across North America to service the majority of the replenishment and delivery requirements for our U.S. retail and North American delivery operations. Most products are shipped from our suppliers to the distribution and fulfillment centers for reshipment to our stores and delivery to our customers through our delivery hubs. As of January 31, 2004, four distribution centers, located in California, Connecticut, Indiana and Maryland, supported our U.S. retail operations, and 30 distribution centers supported our North American delivery operations. Of our 30 North American delivery fulfillment centers, nine locations service more than one of our delivery businesses and three of the nine locations support all of our delivery businesses. We plan to expand our multi-business capabilities into one additional location in fiscal 2004.

We believe our distribution centers provide us with significant labor and merchandise cost savings by centralizing receiving and handling functions and by enabling us to purchase in full truckloads from suppliers. We also believe that the reduction in the number of purchase orders and invoices processed results in significant administrative cost savings. Our centralized purchasing and distribution systems also permit our store associates to spend more time on customer service and store presentation. Since our distribution centers maintain backup inventory, our in-store inventory requirements are reduced, and we operate smaller gross square footage stores than would otherwise be required. A smaller store size reduces our rental costs and provides us with greater opportunity to locate stores more closely to our target customers.

We continually work with our vendors to improve our business relationships. We developed a web site for our vendors, "StaplesPartners.com," which provides suppliers with access to important supplier information, including supplier metrics, purchase order data, sales and inventory data, EDI information and transportation routing information. This web site has improved the speed and accuracy of information, reduced our communication costs and improved our suppliers' understanding of doing business with us.

Over the last several years, we have made incremental improvements in our supply chain that did not require significant changes to our processes. In fiscal 2003, we began to implement a comprehensive program to improve our supply chain performance as we looked to develop integrated systems and improve our processes across all functions. The main objectives of the plan include improving our demand creation and inventory management processes and optimizing our distribution network.

Our key goal is to improve our supply chain reliability and inventory in-stock. We expect the program to benefit sales, operating margins, and inventory turns. We plan to increase sales through higher levels of merchandise in-stock, store execution and selling. We expect to reduce inventory and increase inventory turns by improving product ordering, strengthening collaboration with our vendors, and increasing the amount of merchandise that flows through our supply chain without being stored in our distribution centers. We also intend to expand operating margins by decreasing distribution costs and improving sell-through on promotional goods.

We pursue a variety of marketing strategies to attract and retain target customers. These strategies include broad-based media advertising such as television, radio, newspaper circulars, print and Internet advertising, as well as catalogs, e-mail marketing, a loyalty program and a sophisticated direct marketing system. In addition, we market to larger companies through a combination of direct mail catalogs, customized catalogs and a field sales force. We change our level of marketing spending as well as the mix of media employed depending upon market, customer value, competition and cost factors. This flexible approach allows us to optimize the effectiveness and efficiency of our marketing expenditures.

With the implementation of our Back to Brighton strategy, we realigned our retail and Small Business Delivery marketing efforts to focus on our core customers: small businesses and power users. Our marketing strategies emphasize

our strong brand and leverage all of our retail and delivery vehicles to send a consistent message to our core customers. In addition, we focused more on targeted direct marketing and on our customer loyalty program and lessened our emphasis on circulars.

In 2003, we began to shift our marketing message to reflect our brand promise that Staples makes buying office products easy. We have redesigned the look and feel of our advertising vehicles to reflect our new brand promise and are consistently communicating the brand across all channels and customer touch points, including our signage, television commercials, catalogs, web sites, circulars, direct marketing and store uniforms.

We also have a naming rights agreement with L.A. Arena Company, LLC, which owns the Staples Center, a state of the art sports and entertainment complex in downtown Los Angeles, which opened in 1999. This agreement provides us with marketing, promotional and signage rights; Staples sponsored community-based programs; and various amenities in the Staples Center through 2019.

We place great importance on recruiting, training and providing the proper incentives for quality personnel. We recruit actively on college campuses and also hire talented individuals with experience in successful retail operations. Additionally, current associates are rewarded for recruiting new associates.

We consider customer relations and our associates' knowledge of office products and office related capital goods to be significant to our marketing approach and our ability to maintain customer satisfaction. Associates are trained in a number of areas, including, where appropriate, sales techniques, management skills and product knowledge. We have continued to make an investment in computer-based, multi-media training programs to upgrade associates' selling skills and improve customer service at our retail stores and delivery operations. Much of the training we provide targets sales of capital goods such as fax machines, copiers, furniture and computers. Store management trainees advance through the store management structure by taking on assignments in different areas as they are promoted. Store and call center associates prepare for new assignments through Staples and third party designed training modules, written manuals, video instruction and self-testing.

As of January 31, 2004, Staples employed 31,101 full-time and 29,532 part-time associates.

We compete with a variety of retailers, dealers and distributors in the highly competitive office products market. Our target customers have historically been serviced by traditional office products dealers. We believe we have competed favorably against these dealers in the past because we generally offer lower prices and a broader product selection. We compete in most of our geographic markets with other high-volume office supply chains, including Office Depot and OfficeMax, that are similar in concept to us in terms of pricing strategy and product selection, as well as mass merchants such as Wal-Mart, warehouse clubs, computer and electronics superstores such as Best Buy, and other discount retailers. In addition, both our retail stores and delivery operations compete with numerous mail order firms, contract stationer businesses, electronic commerce distributors, direct manufacturers and local dealers.

We believe we are able to compete favorably against other high-volume office supply chains, mass merchandisers and other retailers, dealers and distributors because of several factors: our focus on the business customer and power user; courteous, helpful and knowledgable associates serving customers; wide assortment of office supplies that are in-stock and easy to find; fast checkout; easy to use web sites; reliability and speed of order shipment; convenient store locations; hassle-free returns and fair prices. Many of our competitors have increased their presence in our markets in recent years. Some of our current and potential competitors in the office products industry are larger than we are and have substantially greater financial resources. No assurance can be given that such increased competition will not have an adverse effect on our business.

In connection with our North American Retail business, we have registered the marks "Staples" and "Staples The Office Superstore" in the Principal Register of the United States Patent and Trademark Office, and the marks "Staples the Office Superstore" and "Staples" in Canada. In connection with our North American Delivery businesses, we have registered the marks "Staples.com," "Staples National Advantage," "Staples Business Advantage," "StaplesLink.com," "Quill," "Quill.com," "Medical Arts Press," "HMI," and "SmileMakers" on the Principal Register of the United States Patent and Trademark Office. In connection with our European Operations, we have registered the mark "Staples" in

many foreign jurisdictions, including, but not limited to, the United Kingdom, Germany, the Netherlands, Portugal and Belgium, and the mark "Office Centre" in many foreign jurisdictions, including, but not limited to, the Netherlands, Portugal and Belgium. As a result of our 2002 acquisition of the multiple European mail order businesses, we also have registered the mark "Bernard" in multiple foreign jurisdictions, including, but not limited to, France and Belgium; the mark "JPG" in many foreign jurisdictions, including, but not limited to, France and Belgium; the mark "Neat Ideas" in many foreign jurisdictions, including, but not limited to, the United Kingdom; the mark "Sistemas Kalamazoo" in Spain; and the mark "MondOffice" in Italy.

We maintain a web site with the address www.staples.com. We are not including the information contained on our web site as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge through our web site our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission.

Our executive officers, their respective ages and positions as of March 1, 2004 and a description of their business experience is set forth below. There are no family relationships among any of the executive officers named below.

As of January 31, 2004, we operated a total of 1,559 superstores in 46 states, the District of Columbia, 10 provinces in Canada, 10 regions in the United Kingdom, 8 regions in Germany, and one in each of the Netherlands, Portugal and Belgium. As of that same date, Staples also operated 43 distribution and fulfillment centers. The following table sets forth the locations of our facilities as of January 31, 2004.

Country/State/Province/Region		Number of Stores
United States
Alabama		12
Arizona		26
Arkansas		4
California		167
Colorado		4
Connecticut		34
Delaware		7
Florida		50
Georgia		34
Idaho		7
Iowa		12
Illinois		15
Indiana		27
Kansas		3
Kentucky		9
Maine		11
Maryland		37
Massachusetts		50
Michigan		31
Minnesota		2
Mississippi		2
Missouri		9
Montana		6
Nebraska		4
Nevada		1
New Hampshire		20
New Jersey		64
New Mexico		7
New York		107
North Carolina		38
North Dakota		2

Country/State/Province/Region		Number of Centers
United States
California		4
Colorado		1
Connecticut		2
Florida		3
Georgia		2
Illinois		2
Indiana		1
Kansas		1
Maryland		1
Massachusetts		1
Minnesota		1
New Jersey		1
New York		2
United States (cont.)
North Carolina		1
Ohio		1
Oregon		1
Pennsylvania		2
South Carolina		1
Texas		2

		30
Canada
Alberta		1
British Columbia		1
Ontario		2

		4
United Kingdom
Pensnett		1
Daventry		1
Doncaster		1

		3
France
Survilliers		1
Tourcoing		1

		2
Belgium—Tongeren		1
Italy—Castelletto Cervo		1
Spain—Lezama		1
Sweden—Norrkoping		1

Most of the existing facilities are leased by us with initial lease terms expiring on dates between 2004 and 2025. In most instances, we have renewal options at increased rents. Leases for 176 of the existing stores provide for contingent rent based upon sales.

Our Framingham, Massachusetts corporate office is owned by us and consists of approximately 650,000 square feet.

We are not a party to nor are any of our properties subject to any material pending legal proceedings other than routine litigation incidental to our business.

No matter was submitted to a vote of our security holders during the fourth quarter of fiscal 2003.

Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the NASDAQ National Market under the symbol "SPLS".

At March 2, 2004, the number of holders of record of our common stock was 7,677.

The following table sets forth for the periods indicated the high and low sales prices per share of our common stock on the NASDAQ National Market, as reported by NASDAQ.

		High		Low
Fiscal Year Ended January 31, 2004
	First Quarter	$	20.25	$	15.73
	Second Quarter		21.02		17.87
	Third Quarter		27.22		18.76
	Fourth Quarter		27.87		24.50

		High		Low
Fiscal Year Ended February 1, 2003
	First Quarter	$	22.45	$	16.01
	Second Quarter		22.15		13.88
	Third Quarter		17.35		11.68
	Fourth Quarter		19.80		14.73

While we will continue to retain earnings for use in the operation and expansion of our business, we have also decided to increase stockholder returns by initiating an annual cash dividend in 2004. The first cash dividend will be $0.20 per outstanding share of our common stock, with such dividend payable on May 17, 2004 to all stockholders of record on April 26, 2004. Previously, we have never paid a cash dividend on our common stock. Our annual dividend payment plan is permitted under our revolving credit agreement, which only restricts the payment of dividends in the event we are in default under the agreement or such payout would cause a default under the agreement. While it is our intention to pay annual cash dividends in years following 2004, any decision to pay future cash dividends will be made by our Board of Directors and will depend upon our earnings, financial condition and other factors.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

The Company's management, with the participation of the Company's chief executive officer and chief financial officer, evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of January 31, 2004. Based on this evaluation, the Company's chief executive officer and chief financial officer concluded that, as of January 31, 2004, the Company's disclosure controls and procedures were (1) designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company's chief executive officer and chief financial officer by others within those entities, particularly during the period in which this report was being prepared and (2) effective, in that they provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.

No change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended January 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Certain information required by Part III is omitted from this Annual Report on Form 10-K and incorporated herein by reference to the definitive proxy statement with respect to our 2004 Annual Meeting of Stockholders (the "Proxy Statement"), which we will file with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Report.

Certain information required by this Item is contained under the heading "Executive Officers of the Registrant" in Part I of this Annual Report on Form 10-K. Other information required by this Item will appear under the headings "Proposal 1—Election of Directors" and "Corporate Governance—Directors of Staples" in our Proxy Statement, which sections are incorporated herein by reference.

The information required by this Item pursuant to Item 405 of Regulation S-K will appear under the heading "Executive Compensation—Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement, which section is incorporated herein by reference.

Information required by this Item pursuant to Item 401(h) and 401(i) of Regulation S-K relating to an audit committee financial expert and identification of the Audit Committee of our Board of Directors will appear under the heading "Corporate Governance" in our Proxy Statement, which section is incorporated herein by reference.

We have adopted a written code of ethics that applies to our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. Our code of ethics, which also applies to our directors and all of our officers and employees, can be found on our web site, which is located at www.staples.com. We intend to make all required disclosures concerning any amendments to, or waivers from, our code of ethics on our web site.

The information required by this Item will appear under the heading "Executive Compensation" and "Corporate Governance—Director Compensation" in our Proxy Statement, which sections are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item will appear under the headings "Beneficial Ownership of Common Stock" and "Executive Compensation—Securities Authorized for Issuance Under Equity Compensation Plans" in our Proxy Statement, which sections are incorporated herein by reference.

The information required by this Item will appear under the heading "Corporate Governance—Certain Relationships and Related Transactions" in our Proxy Statement, which section is incorporated herein by reference.

The information required by this Item will appear under the heading "Corporate Governance—Independent Auditor's Fees" in our Proxy Statement, which section is incorporated herein by reference.

On November 18, 2003, we furnished a Current Report on Form 8-K under Item 12 (Results of Operations and Financial Condition) containing a press release announcing our financial results for the fiscal quarter ended November 1, 2003.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 2, 2004.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 2, 2004.

For the fiscal year ended January 31, 2004		Commission File Number 0-17586
	STAPLES, INC. (Exact name of registrant as specified in its charter)
Delaware (State of Incorporation)		04-2896127 (I.R.S. Employer Identification No.)
	Five Hundred Staples Drive, Framingham, Massachusetts 01702 (Address of principal executive offices and zip code)
	508-253-5000 (Registrant's telephone number, including area code)
	Securities registered pursuant to Section 12(b) of the Act: None
	Securities registered pursuant to Section 12(g) of the Act: Staples Common Stock, par value $0.0006 per share (Title of class)

United States (cont.)
Ohio		49
Oklahoma		16
Oregon		17
Pennsylvania		81
Rhode Island		10
South Carolina		15
South Dakota		1
Tennessee		18
Texas		32
Utah		10
Vermont		7
Virginia		31
Washington		27
Washington DC		3
West Virginia		5
Wisconsin		10

		1,134
Canada
Alberta		24
British Columbia		30
Manitoba		6
New Brunswick		6
Newfoundland		3
Nova Scotia		9
Ontario		84
Quebec		54
Saskatchewan		6
Prince Edward Island		2

		224
United Kingdom
Anglia		6
Borders		1
Central		21
Granada		11
HTV		8
London		14
Meridien		13
Tyne-Tees		3
West Country		5
Yorkshire		11

		93
Germany
Baden-Wurttemberg		3
Bayern		3
Bremen		2
Hamburg		9
Hessen		6
Niedersachsen		9
Nordrhein-Westfalen		18
Schleswig-Holstein		3

		53
Netherlands		40
Portugal		14
Belgium		1

Signature		Capacity

/s/ RONALD L. SARGENT Ronald L. Sargent		President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ THOMAS G. STEMBERG Thomas G. Stemberg		Chairman of the Board
/s/ BASIL L. ANDERSON Basil L. Anderson		Director and Vice Chairman
/s/ BRENDA C. BARNES Brenda C. Barnes		Director
/s/ ARTHUR M. BLANK Arthur M. Blank		Director
/s/ MARY ELIZABETH BURTON Mary Elizabeth Burton		Director
/s/ GARY L. CRITTENDEN Gary L. Crittenden		Director
/s/ RICHARD J. CURRIE Richard J. Currie		Director
/s/ GEORGE J. MITCHELL George J. Mitchell		Director

/s/ JAMES L. MOODY, JR. James L. Moody, Jr.		Director
/s/ ROWLAND T. MORIARTY Rowland T. Moriarty		Director
/s/ ROBERT C. NAKASONE Robert C. Nakasone		Director
/s/ MARTIN TRUST Martin Trust		Director
/s/ PAUL F. WALSH Paul F. Walsh		Director
/s/ JOHN J. MAHONEY John J. Mahoney		Executive Vice President, Chief Administrative Officer and Chief Financial Officer (Principal Financial Officer)
/s/ JEFFREY E. NACHBOR Jeffrey E. Nachbor		Senior Vice President and Corporate Controller (Principal Accounting Officer)

		Fiscal Year Ended
		January 31, 2004(1) (52 weeks)		February 1, 2003(2) (52 weeks)		February 2, 2002(3) (52 weeks)		February 3, 2001(4) (53 weeks)			January 29, 2000 (52 weeks)
Statement of Income Data:
Sales		$	13,181,222	$	11,596,075	$	10,744,373	$	10,673,671		$	8,936,809
Gross profit			3,622,099		2,943,482		2,570,493		2,576,505			2,215,246
Net income			490,211		446,100		264,970		59,712			314,988
Basic earnings/(loss) per common share(5):
	Staples, Inc. Stock		1.01		0.96		0.40		—			0.42
	Staples RD Stock		—		—		0.18		0.16			0.26
	Staples.com Stock		—		—		0.01		(0.84	)		(0.09	)
Diluted earnings/(loss) per common share(5):
	Staples, Inc. Stock		0.99		0.94		0.40		—			0.41
	Staples RD Stock		—		—		0.17		0.15			0.26
	Staples.com Stock		—		—		0.01		(0.84	)		(0.09	)
Dividends			—		—		—		—			—

		STAPLES, INC.
		By:	/s/ RONALD L. SARGENT Ronald L. Sargent, President and Chief Executive Officer (Principal Executive Officer)