Office Depot Reports Q2 Loss
By Steve Smith On Aug 7 2012 - 1:11pm
Boca Raton, Fla. - Office Depot reported a higher net loss
and lower sales in the second quarter, ended June 30.
The chain had a net loss of $64 million, compared with a net
loss of $29 million in the second quarter of 2011.
Total sales for the second quarter were approximately $2.5
billion, down 7 percent compared with the second quarter of 2011.
Second-quarter 2012 results included approximately $9
million of charges primarily related to restructuring activities and actions to
improve future operating performance, and approximately $24 million related to
a non-cash asset impairment charge.
Excluding the charges (after tax) and a $16 million tax
benefit associated with a U.S. Internal Revenue Service ruling, the second-quarter
net loss, after preferred stock dividends, would have been approximately $40
In the North American retail division, reported second-quarter
sales were $994 million, a decrease of 8 percent compared with the prior year.
The decline in total sales reflects a decrease of approximately 200 basis
points related to the closing of stores in Canada last year and additional
closures in the U.S. since the second quarter of 2011, and another 200 basis
point decrease from the calendar shift impacts in 2012 because 2011 was a 53-week
Comp-store sales in the 1,094 stores that have been open for
more than one year, and aligned to match the same selling weeks, decreased 4
percent for the second quarter of 2012, a sequential improvement from the 6
percent decline in the first quarter of 2012.
The decline in comparable sales of computers and related
products largely explains the division's overall comp-sales decline for the
second quarter of this year. Customers switching from laptop computers to
tablets contributed to lower sales but improved product margins.
The average order value was slightly negative in the second
quarter, and customer transaction counts declined approximately 3 percent
compared with the same period last year.
The division reported an adjusted operating profit,
excluding the store asset impairment charge of approximately $24 million, of $2
million in the second quarter of 2012, compared with an adjusted operating
profit of $15 million in the same period last year, excluding approximately $12
million of charges related to store closures in Canada. This decline primarily
reflects the negative flow-through effect of lower sales, promotional activity,
the clearance of inventory in advance of receiving new products, and the
absence in 2012 of benefits recognized in 2011 from removing recourse provisions
in a private-label credit card program.
At the end of the second quarter of 2012, Office Depot
operated 1,117 stores in the U.S. and Puerto Rico. The division opened no new
stores and closed six during the second quarter of 2012.