Bernstein analyst Colin McGranahan called the results particularly impressive in light of a soft market, Office Depot'sweak results, and cautious commentary and a more mixed performance from OfficeMax.
McGranahan said Staples' earnings reflected "the sustainability of the operating model and the strong management team."
The company is working to boost its delivery, international, private label and copy and print businesses amid a slowdown at North American stores.
Net income fell to $274.5 million, or 38 cents per share, in the third quarter ended on Nov. 3 from $289.9 million, or 39 cents per share, a year earlier.
Excluding a $24 million charge for settling a class-action lawsuit, Staples earned 42 cents per share, topping the analysts' average forecast of 40 cents, according to Reuters Estimates.
Sales rose 9 percent to $5.17 billion. North American retail sales rose 3 percent, but sales at stores open at least a year fell 3 percent on lower demand for business machines, furniture and computers.
But that unit's operating margin rose 23 basis points to 11.1 percent, helped by a higher ratio of more-profitable products and tight expense controls.
Operating income at Staples' international unit rose on gains in both the retail and delivery businesses.
Slowing U.S. Growth
The U.S. office supply business has suffered because of jittery credit markets, the recent slowing job picture and the crumbling U.S. housing sector - all of which are leading small companies to cut spending.
"We remain cautious about the economic climate, driving the weak sales trends we've seen throughout 2007 and expect this to continue for at least the first half of 2008," Chief Financial Officer John Mahoney said on a conference call.
The company said the second half of 2008 would be "a period of recovery."
Once the economy returns to "a more normal pattern," he said, Staples should also return to its long-term annual growth target of 15 percent to 20 percent for earnings per share and 10 percent to 15 percent for sales.
In the near term, the Framingham, Massachusetts-based company said it expected earnings-per-share growth of about 15 percent for the fourth quarter and the full year, excluding items.
For the fourth quarter, Staples anticipates low double-digit percentage sales growth, flat to slightly lower same-store sales and high-single-digit sales growth in the North American retail segment.
For next year, the company said it expected growth in the low teens for earnings per share, excluding items, and in the high single digits for sales. For North American retail, it forecast same-store sales growth in the low single digits.
Last week Office Depot reported lower-than-expected profit, lowered its outlook for store openings and said it hired an investment advisor for help reviewing its capital structure options, prompting some analysts to speculate that it may be considering a possible merger with Staples.
On Tuesday's call, Staples' executives said so far the company has only looked at small tuck-in acquisitions, but said it would consider a significant acquisition opportunistically.
The company declined to comment on any specific acquisition.
Staples shares were up $2.20, or 11.1 percent, to $21.96 in afternoon trade on Nasdaq. Office Depot shares were up 2.3 percent at $16.92 and OfficeMax shares were down 0.1 percent at $23.69, both on the New York Stock Exchange.
At Monday's close, Staples' stock traded at 12.5 times next year's earnings estimates, a premium to rival Office Depot, whose trading multiple is 10, but below the average of 15 for the Dow Jones U.S. Retail Index