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Office Depot Stumbles In Q1

Tuesday April 30th, 2013 - 10:54AM


For the fiscal quarter ended March 30, Office Depot, Inc. reported a net loss, after preferred stock dividends, of $17 million, or six cents per share, compared to net earnings, after preferred stock dividends, of $41 million, or 14 cents per diluted share, in the 2012 quarter. Total company sales were $2.7 billion, down 5% versus the 2012 first quarter in both U.S. dollars and in constant currency, the company stated.

The North American Retail Division posted operating income of $15 million in the first quarter versus $18 million in period the year before. Division comparable store sales decreased 5% in the first quarter, according to the company. Overall sales slipped by 6% to $1.1 billion versus the prior-year period. The timing of the New Year’s and Easter holidays negatively impacted sales in the quarter by 130 basis points, Office Depot stated. Total company sales took a $58 million or 200 basis point hit from holiday shifts, the company added.

Softness in technology peripherals and a consumer demand shift out of laptops and into tablets, which have a lower average selling price and lower basket ring, exacerbated the decline in North American Retail Division revenues, Office Depot noted. Sales in Copy and Print Depot and cleaning and break room supplies gained, the retailer said, while supplies and furniture sales were down year-over-year. Average order value slipped slightly in the first quarter and customer transaction counts declined by 5% compared to last year’s period, it related.

The division operating income included charges of $6 million and $18 million in the first quarters of 2013 and 2012, respectively, related to non-cash store asset impairments primarily, Office Depot asserted. Excluding the charges in both periods, the year-over-year first quarter operating income decrease mainly derived from the negative flow-through impact of lower sales, partially offset by a 60 basis point gross margin increase due primarily to supply chain cost management. Advertising costs were lower than in the prior year, the company said.

The shift in the timing of the New Year and Easter holidays negatively impacted company-wide first quarter sales by $58 million or 200 basis points, Office Depot maintained. Results in the period included approximately $25 million of pre-tax charges, comprised primarily of merger-related costs, restructuring activities and $5 million related to non-cash North American Retail Division store asset impairment charges. Excluding the charges, net earnings, after preferred stock dividends, would have been $1 million or zero cents per share, the company said. First quarter 2012 results included $9 million of net benefit from a favorable pension settlement offset by restructuring activities, loss on the extinguishment of debt and non-cash store asset impairment charges. Excluding those items, Office Depot said, first quarter 2012 net earnings, after preferred stock dividends, would have been $30 million or 11 cents per share.

At the end of the first quarter of 2013, Office Depot said it operated 1,111 stores in the United States and Puerto Rico. The North American Retail Division opened no new stores and closed one during the quarter.