Office Depot Narrows Loss Though North American Comps Decline

For the second quarter ended June 28, Office Depot, Inc. posted adjusted operating income of $18 million compared to a pro forma adjusted operating loss of $6 million that includes combined figures from pre-merger Office Depot and Office Max in the 2013 period. Adjusted net loss attributable to common stockholders for the second quarter was $12 million, or two cents per share, compared to a combined pro forma adjusted net loss of $18 million, or three cents per share, in the period a year ago.

Net loss was in line with a published Thomson Reuters average analyst estimate.

Office Depot reported a second quarter operating loss of $185 million and a net loss available to common stockholders of $190 million, or 36 cents per share, versus $45 million and a net loss available to common stockholders of $64 million, or 23 cents per share, in the period last year.

Second quarter North American Retail Division sales were $1.5 billion versus $900 million in the 2013 period, reflecting the inclusion of OfficeMax sales this year. On a combined store pro forma basis, second quarter 2014 sales declined 5%, and comparable store sales declined 3% versus last year, Office Depot maintained. Comps decreased primarily due to lower transaction counts partially offset by higher average order values, it asserted. Division operating loss was $6 million, or 0.4% of sales, in the second quarter compared to a reported division operating loss of $20 million, or 2.1% of sales, in the second quarter of 2013 and a combined pro forma operating loss of $22 million, or 1.4% of sales, in the second quarter of 2013.

Total sales were $3.84 billion compared to $2.42 billion in the second quarter of 2013, reflecting the inclusion of OfficeMax sales in the most recently concluded reporting period. Total sales were 2% lower than combined pro forma sales of $3.9 billion in the second quarter of the year prior.

“During the second quarter, our team executed exceptionally well, which enabled us to deliver merger synergies more quickly than anticipated,” said Roland Smith, Office Depot chairman and CEO, in announcing the financial results. “We are very pleased with the integration of legacy Office Depot and OfficeMax as we create a culture focused on achieving our critical priorities in the near and long term. As planned, we have completed our analysis of the North America retail store optimization strategy and have continued to make progress on the development of our unique selling proposition. Based on accelerated synergies and improving execution, we have updated our full year 2014 outlook for adjusted operating income to be not less than $200 million, an increase from our prior outlook of not less than $160 million.”

Smith added, “After completing our store optimization analysis, we continue to expect to close at least 400 locations in the U.S. by the end of 2016, with approximately 165 stores closing in 2014. Further, we have increased the expected annual run-rate synergies from this initiative to at least $100 million by the end of 2016, from our prior outlook of at least $75 million.”


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