First quarter results demonstrate that Office Depot held up well under the difficult retail conditions created by the COVID-19 pandemic.
For the quarter, Office Depot posted net income of $45 million, or eight cents per diluted share, versus $8 million, or one cent per diluted share, in the year-prior period. Adjusted for one-time charges, net income was $66 million, or 12 cents per diluted share, versus $39 million, or seven cents per diluted share, in the period a year earlier.
Office Depot topped a MarketBeat-published first quarter analyst consensus estimate of seven cents per adjusted diluted share.
Total sales for the quarter were $2.73 billion, down 2% from the 2019 period, with product sales coming in at $2.34 billion versus $2.36 billion in the year-previous quarter. Office Depot stated that the decrease in revenue primarily resulted from lower sales in the retail division, driven by fewer retail stores in service partially offset by higher same store sales, combined with lower sales in the CompuCom division and business solutions division largely resulting from the effects of the COVID-19 outbreak.
Operating income was $80 million compared to $24 million in the period a year before.
Retail division comparable sales advanced 2% as overall sales slipped to $1.16 billion versus $1.18 billion in the quarter year over year.
Gerry Smith, Office Depot CEO, said, “While the global pandemic has quickly impacted the business environment, the foundation we have created over the past few years has provided us the flexibility to continue to serve our customers’ expanded needs, preserve cash, and deliver necessary products and support services to help our customers succeed through this crisis. Our strong Q1 performance reflects the commitment and tireless work of our team as we supported the essential needs of businesses, consumers, educators, students, health care workers and first responders during the global health crisis that has unfolded in our nation. Our B2B focus is helping businesses remain operational in the home or at the office, our facilities have largely remained open serving customers with enhanced sanitation and safety protocols, and our e-commerce platform and retail stores are proving to be trusted means for customers to access the critical products and services they need. Same store sales were up 2% over the same period last year and sales in our e-commerce channel experienced a significant increase in demand. Our ability to continue to serve customers during the COVID-19 health crisis helped drive strong operating results and generate $188 million in operating cash flow including $173 million in adjusted free cash flow. This strong performance resulted in our highest net cash position in over two years and nearly $1.7 billion in total available liquidity.”
Smith added that Office Depot continues to face challenges in the current retail environment but “we are in a strong financial position and remain focused on utilizing our B2B platform to provide essential products and services necessary to help our customers and the nation weather through this pandemic. We have an extremely strong balance sheet that has been further enhanced by refinancing our credit facility and paying off our term loan, which preserves cash and extends our credit facility maturity to 2025. We have a global sourcing and supply chain network capable of delivering essential products including personal protective equipment, we have business support capabilities enabling enterprises and individuals to work from home and learn from home, and we have a business model that has significant variable cost flexibility. We expect that all of these factors place us in a position to successfully navigate this evolving environment.”