Office Depot Posts Q1 Gains, Awaits Staples Merger Approval

For the first quarter, Office Depot, Inc. posted operating income of $88 million and net income attributable to the company of $45 million, or eight cents per share, versus an operating loss of $79 million and the net loss attributable to the company of $109 million, or 21 cents per share, in the 2014 period.

Adjusted operating income was $135 million while adjusted net income attributable to Office Depot was $71 million, or 13 cents per share, compared to adjusted operating income of $68 million and adjusted net income attributable to Office Depot of $37 million, or seven cents per share, in the 2014 first quarter.

Earnings matched a Zacks Investment Research analyst average estimate, although revenues fell short by over $200 million.

Total reported 2015 first quarter sales were $3.9 billion versus $4.4 billion in the year-earlier quarter.

On February 4, Office Depot announced its intent to be acquired by Staples, Inc., a move made after the company recently acquired OfficeMax.

Office Depot North American Retail Division sales were $1.65 billion in the first quarter, down 9% year over year, the company reported, due to planned store closures and a 2% comparable store sales decline resulting from a lower average order value. However, division operating income gained to $86 million from $37 million in the 2014 quarter. The increase arose largely from a decrease in occupancy costs driven by store closures, a decrease in selling, general, and administrative expenses including advertising and payroll, and improvement in the gross margin rate, partially offset by the negative flow-through impact of lower sales, Office Depot noted.

Office Depot maintained that it ended the first quarter with 1,725 retail stores in its North American retail division. In the quarter, the company closed 20 stores.

“We were pleased to have doubled adjusted operating income in the first quarter versus last year, primarily due to continued excellent execution on our merger integration, synergies and efficiencies,” said Roland Smith, Office Depot chairman and CEO. “As expected, we experienced sales declines compared to prior year, driven primarily by planned store closures and foreign currency translation. We continue to focus on executing on our critical priorities and remain on track with the Office Depot/OfficeMax merger integration and our European restructuring.”

Smith added, “Regarding the pending acquisition by Staples, the regulatory review process is progressing well and we continue to anticipate this transaction will close by the end of 2015.”