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Office Depot Q2 Loss Increased But Furnishings Sales Gain

Tuesday August 7th, 2012 - 12:20PM


In the second quarter, Office Depot, Inc. reported a net loss, after preferred stock dividends, of $64 million, or 23 cents per diluted share, versus a net loss, after preferred stock dividends, of $29 million, or 11 cents per diluted share, in the 2011 period. Total company sales slipped 7% for the second quarter, or 5% on a constant currency basis, versus the 2011 period to $2.5 billion.

Second quarter 2012 results included $9 million in charges primarily related to restructuring activities and actions to improve future operating performance, as well as $24 million related to a non-cash asset impairment charge. Excluding those charges and a $16 million tax benefit associated with a United States Internal Revenue Service ruling, the second quarter 2012 net loss, after preferred stock dividends, would have been approximately $40 million, or 14 cents per share. Second quarter 2011 results included approximately $20 million in charges primarily related to restructuring activities and other costs intended to improve efficiency and benefit future operations. Excluding those charges, the net loss, after preferred stock dividends, would have been $17 million, or  six cents per share, in the 2011 period.

Office Depot missed a Thomson Reuter’s analyst average estimate by five cents per share.

Office Depot’s North American Retail Division reported an 8% year-over-year second quarter sales decrease to $994 million. The decline in total sales reflects a decrease of approximately 200 basis points related to the closing of stores in Canada last year and additional closures in the U.S. since the second quarter of 2011, as well as another 200 basis point decrease in 2012 because 2011 was a longer 53-week fiscal period.

Comparable store sales in those 1,094 Office Depot locations that have been open for more than one year decreased 4% for the second quarter versus the prior-year period. The decrease was largely due to a decline in comparable sales of computers and related products, Office Depot asserted. Copy and Print Depot, office furniture and seating sales increased. Sales in the supplies category were flat, while those of ink and toner increased slightly. Average order value was slightly negative in the second quarter and customer transaction counts declined approximately 3% compared to last year’s period.

The North American Retail Division reported an adjusted operating profit, excluding a $24 million store asset impairment charge, of $2 million in the second quarter versus an adjusted operating profit of $15 million in the same period last year, excluding $12 million of charges related to Canadian store closures. The decline in operating profit primarily reflects the negative flow-through effect of lower sales, promotional activity and the clearance of inventory in advance of receiving new products, Office Depot noted, as well as the absence in 2012 of benefits recognized in 2011 from removing recourse provisions in a private label credit card program. Those factors were partially offset by a year-over-year gross margin improvement of approximately 80 basis points, lower payroll and general and administrative costs, the retailer stated.