Office Depot Q4 Earnings Up Despite Lower U.S. Retail Comp

Although comps slipped in its retail division, Office Depot posted higher earnings in the fourth quarter and fiscal year.

Office Depot posted net income from continuing operations of $55 million, or 10 cents per diluted share, in the fourth quarter, versus a loss of $14 million, or two cents per share, in the year-prior period.

Adjusted to exclude one-off events, net income from continuing operations was $68 million, or 12 cents per diluted share, versus $52 million, or nine cents per diluted share, in the year-earlier quarter. Office Depot topped a MarketBeat-published analyst consensus estimate of nine cents per diluted share.

Sales were $2.51 billion while operating income was $74 million versus $2.67 billion and $24 million, respectively, in the year-before period.

Retail division sales were $1.01 billion and operating income was $34 million versus $1.09 billion and $28 million in the year-past period. Comparable sales slipped 4% in the quarter year over year. Lower store traffic hurt fourth quarter comps, the company stated, partially offset by higher conversion rates, higher sales per customer and increased loyalty program membership.

For the full fiscal year, net income from continuing operations came in flat at $99 million, or 18 cents per diluted share, as compared to the year prior. Adjusted net income from continuing operations was $228 million, or 41 cents per diluted share, versus $199 million, or 35 cents per diluted share, in the year earlier.

Sales were $10.65 billion versus $11.02 billion in the year before and operating income was $191 million versus $254 million in the previous year.

Retail division sales were $4.36 billion and operating income was $194 million versus $4.64 billion and $193 million in the year past. Comps slid 4% year over year, matching the fourth quarter number.

“We made tremendous progress throughout the year on our transformation, achieving our operational and free cash flow objectives, strengthening our balance sheet and improving our foundation for profitable growth,” said Gerry Smith, Office Depot CEO. “Our Business Acceleration Program continued to exceed expectations, streamlining our operations and positioning us to invest in additional growth opportunities in the coming year. Profit margins were up in all three divisions in the quarter, driving a 10% increase in adjusted operating income in the fourth quarter, and a 2% increase for the year. As a B2B-focused company, we strengthened our platform and built a more robust pipeline for profitable growth in our Business Solutions and CompuCom divisions. Although some of these actions have had an adverse near term impact on top-line growth, they will significantly improve our competitive position for the future.”