Office Depot Posts 3rd Straight Earnings Miss

The company announced further cost-cutting measures, including the closure of an additional 300 stores in North America.
Matthew HellerAugust 3, 2016

Office Depot on Wednesday posted lower-than-expected earnings for a third straight quarter but its shares rose more than 5% as the company announced more store closings.

For the second quarter, Office Depot earned $210 million, or 38 cents a share, compared with a year-earlier loss of $58 million, or 11 cents a share. Excluding items, earnings were three cents a share, compared with six cents a year earlier.

Profits were boosted by the $250 million breakup fee Office Depot received from Staples after their proposed merger collapsed because of antitrust concerns. But analysts surveyed by Thomson Reuters had projected per-share earnings of six cents.

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Revenue slipped 6% to $3.22 billion and same-store sales declined 1% year over year at the company’s more than 1,500 North American retail outlets. Office Depot, which has been hit by competition from online retailers and the increasing digitalization of the workplace, closed 42 stores in the second quarter as part of a plan to close 400 stores.

On Wednesday, it announced that it was expanding that plan to include approximately 300 additional store closures over the next three years. The company also said it plans to trim $250 million in costs by 2018 and was pursuing a sale of its money-losing 289-store international operation.

Office Depot’s shares have fallen more than 40% so far this year but in trading Wednesday, they rose 5.8% to $3.48.

“We are making good progress rebuilding our sales pipeline and moving our overall business forward, despite the disruption of the prolonged Staples acquisition attempt,” CEO Roland Smith said in a news release. “The initiatives we announced today are a result of our comprehensive strategic business review which is now substantially complete.”

The company also set a 2.5 cent quarterly dividend and said it will buy back up to $250 million in stock. “In the near term, we remain focused on executing our critical priorities, completing the OfficeMax merger integration, implementing our new cost-saving programs, and returning capital to shareholders,” Smith said.