Office Depot's Profit Rises on Cost Cuts, Overcoming Lower Revenue
November 02 2016 - 10:00AM
Dow Jones News
Office Depot Inc. said revenue fell 7% in the latest quarter as
demand remained soft, but profit grew as it slashed costs by
closing stores and as it booked a hefty tax benefit in the
quarter.
Shares rose 6.5% to $3.25 in premarket trading.
Office Depot closed seven stores in the third quarter, ending
the period with 1,506 stores in North America. It is working
through its plan to close an additional 300 stores, on top of 400
stores from an earlier phase of closures, over the next three
years.
In August, after its proposed tie-up with larger rival Staples
Inc. failed regulatory muster, the company launched a quarterly
dividend. The company also plans to trim $250 million in costs by
2018.
Office Depot and Staples thought bulking up could save costs,
and that the firms could better manage the difficult retail
environment as a combined company.
In the September period, same-store sales fell 2% in North
America, compared with a 3% increase during the prior-year
quarter.
Over all, Office Depot earned $44 million, or 8 cents a share,
compared with $6 million, or a penny a share. Excluding items,
earnings were 16 cents a share.
Revenue slipped to $2.84 billion from $3.05 billion a year ago.
Excluding the impact of store closures and foreign currency
translation, the company said sales fell 4%.
Analysts surveyed by Thomson Reuters had projected per-share
earnings of 15 cents on revenue of $3.49 billion.
The company said lower occupancy costs and fewer selling,
general and administrative expenses like payroll helped offset
declining revenue. Meanwhile, it logged a $240 million income-tax
benefit.
A federal judge blocked the $6.3 billion deal in May, though in
2013, the U.S. Federal Trade Commission approved Office Depot's
takeover of the smaller OfficeMax. The FTC argued its tie-up with
Staples would mean higher prices and fewer options for big
companies that buy office supplies in bulk.
In August, Office Depot's chief executive Roland Smith said he
would retire next year, and Staples Chief Ron Sarget stepped down
from the role in June.
Total company sales in the fourth quarter—and in 2017—are
expected to be lower than 2015 and the company said it plans to
close 65 more stores in the period.
Write to Joshua Jamerson at joshua.jamerson@wsj.com
(END) Dow Jones Newswires
November 02, 2016 09:45 ET (13:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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