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Corporate Express Reports Increase in US Sales

Dutch office goods supplier Corporate Express reversed falling sales in its key U.S. market, sending its shares up as much as 10 percent and bolstering its defense against hedge funds pushing for a sale.

Fourth-quarter net profit, excluding the proceeds from the sale of the ASAP software division, fell to 31.8 million euros ($46.58 million) from 40.9 million euros a year ago, but was above the average forecast in a Reuters poll of eight analysts for 20 million euros.

Total sales were just below expectations at 1.41 billion euros, but a 3 percent rise in underlying sales in North America, where the sub-prime crisis has left the economic outlook uncertain, bucked expectations after four successive quarters of falling sales.

Corporate Express' performance depends to a high degree on the U.S. economy, where it generates about 50 percent of sales, and the number of white-collar jobs. While conceding the U.S. outlook was uncertain, the company said it was confident it could outperform the market.

"The main reason for the better than expected results was a strong performance of the U.S. division, which given the string of disappointment there in the past is reassuring and an indication that the organization is back on track again," ING analyst Marc Zwartsenburg, who rates the firm a "hold," said in a research note.

Shares traded up 7 percent at 5.35 euros, having hit 5.58 euros, outperforming the DJ Stoxx European industrials index which was down 0.8 percent.

The company said sales growth in January in North America continued in line with fourth-quarter rates, and market share was growing in both the United States and Canada, as Corporate Express sold more to its larger customers.

It confirmed its target of annual underlying sales growth of at least 6 percent between 2008-2010.

Pressure

Corporate Express has had to fight off pressure to sell itself from hedge fund investors. Last year it installed new management who pledged to revive sales while keeping the firm independent -- a position they reiterated.

"Clearly there is still much work to be done, but we are on track," said Chief Executive Peter Ventress.

"We are confident our actions and strategic priorities put us in a robust position to outperform the market, while we are fully aware the economic outlook for 2008 is uncertain."

Doubts over a possible recession in the United States had prompted analysts to cut their targets and earnings forecasts.

The firm generates around half its revenue in the United States and had seen pressure on margins rise and its market share shrink. Rivals such as Office Depot have warned of weak economic conditions in the United States.

Talk of a possible takeover by U.S. rival Staples this week boosted its shares, although Corporate Express says no discussions are under way. Analysts have suggested the Dutch firm would offer many synergies for Staples.

Corporate Express is trading at a discount to Staples, at 10 times projected 2008 earnings versus a price-earnings ratio of 15 for Staples and 10 for number two Office Depot.