Office Depot Sales Drop 10% In N.A.

DELRAY BEACH, FLA. — Although Office Depot said it continues to face external economic challenges in its North American Retail Division, it claims to have made solid progress in better managing its costs, particularly in warehouses.

On that note, the office products retailer said sales in its North American division were down 10 percent in the first quarter ended March 31, reaching $1.6 billion, compared with $1.8 billion in the same three months last year. Comp-store sales in the 767 units open more than one year also dropped 10 percent in the first quarter.

Store operating profit in the first quarter was $84.5 million, compared with $156.8 million in the same three months in 2000.

Gross margins were negatively affected by Office Depot's SKU rationalization program; price reductions in paper, ink and toner; and the lack of leverage on payroll, property and other costs due to lower sales during the quarter, said the company.

The retailer said it opened six new office supply superstores during the first three months of the year, and operated 824 superstores in North America at the end of the first quarter.

Total sales at Office Depot in the first quarter dipped 2 percent to $3 billion, down from $3.1 billion in the year-ago period. Worldwide comp-store sales decreased less than 1 percent.

The company reported a 48 percent drop in net income during the first quarter, hitting $56.3 million, compared with $109 million in the same period in 2000. It said the decline was due primarily to weak North American retail comp-store sales and lower gross margins on planned SKU reductions.