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Product in a Staples outlet in Boston.

Lisa Poole/The Associated Press

Staples Inc. reported lower-than-expected quarterly revenue on weak demand in North America, Europe and Australia, prompting the largest U.S. office supply chain to forecast flat sales for the fiscal year.

Current expectations for the year assume slower growth in the U.S. economy and continued weakness in Europe, Staples said on Wednesday.

The company said its sales had fallen 5.5 per cent to $5.50-billion in the second quarter ended on July 28, well below the analysts' average estimate of $5.72-billion.

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The news came after smaller rival Office Depot Inc. reported a wider-than-expected quarterly loss last week on tepid demand in Europe and the United States. OfficeMax, the No. 3 U.S. office supply chain, has said it expects its third-quarter sales to be flat or just slightly higher than a year earlier.

Many investors look at office supply retailers as a barometer of economic health because demand for their products is closely tied to white-collar employment rates.

Sales at these chains have suffered as corporate customers and other shoppers cut back on discretionary spending amid uncertainty in the U.S. economy. As a result, Staples, Office Depot and OfficeMax have all had to rely on cost cuts to boost earnings in recent quarters.

At Staples, sales of computers and core office supplies were particularly weak during the second quarter, Chief Executive Officer Ron Sargent said.

Sales at stores open at least a year fell 2 per cent in North America, as customer traffic fell and average order size was flat.

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