Office Depot Reports $413M Q3 Loss

TWICE Staff -- TWICE, 10/29/2009

Boca Raton, Fla. - Office Depot reported a $413 million net loss and lower sales in its fiscal third quarter which ended Sept. 26.

The net loss of $413 million in the third quarter compares with a net loss of $7 million in the same period of 2008.

Third-quarter sales decreased 17 percent to $3 billion compared with the same quarter last year. Excluding the impact of foreign currency translation on the international division, total company sales were down 15 percent.

Office Depot Pares CE Mix

Office Depot Second QuarterFinancial Result.

In the North American retail division third-quarter sales were $1.3 billion, down 18 percent compared with the same period last year, due in part to having 117 fewer stores open in the third quarter of 2009 vs. the prior year period.

Comparable-store sales in the 1,144 stores in the U.S. and Canada that have been open for more than one year decreased 14 percent for the third quarter compared with the prior year period. Consistent with previous periods, the decrease in comp-store sales was driven by macroeconomic factors as consumers and small business customers continued to hold back their spending, especially in large ticket categories, and the division's commitment to proactively reduce unacceptable margin promotions in select categories, the company said.

The North American retail division had an operating profit of $35 million for the third quarter, compared with $12 million reported in the same period of the prior year. The operating profit improvement was driven by a number of factors including higher product margins for the fifth straight quarter, a comparative benefit from closing underperforming stores, lower asset impairment charges compared with last year, and reduced operating expenses. These positive factors were partially offset by the unfavorable impact the sales volume decline had on gross margin and operating expenses, the retailers said.

During the third quarter, Office Depot closed one store, opened one and relocated three stores, bringing the total store count for North America to 1,158 as of Sept. 26.

The North American business solutions division had third-quarter sales of $880 million, down 16 percent compared with the same period last year. The division reported an operating profit of $21 million for the third quarter of 2009 compared with $39 million for the same period of the prior year.

The international division reported sales of $861 million in the third quarter, a decrease of 16 percent compared with the same period last year, while sales in local currency decreased by 9 percent.

The unit's operating profit was $34 million in the third quarter of 2009 compared with $36 million in the same period of the prior year. The change in the division's operating profit for the third quarter of 2009 resulted as the flow through impact of lower sales levels was almost completely offset by lower operating expenses. Additionally, changes in foreign exchange rates, driven by a stronger U.S. dollar, unfavorably impacted operating profit.