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Merged Office Depot Posts Higher Sales, Net Loss

Boca Raton, Fla. — Office Depot reported higher sales but a net loss for its fourth quarter and full-year results, ended Dec. 28, 2013, the first report after its merger with OfficeMax last November. 2/25/2014 04:22:00 AM Eastern

Boca Raton, Fla. — Office Depot reported higher sales but a net loss for its fourth quarter and full-year results, ended Dec. 28, 2013, the first report after its merger with OfficeMax last November.

Reported (GAAP) results include total sales for the fourth quarter increasing 33 percent to $3.5 billion compared with the fourth quarter of 2012. Sales were $11.2 billion in the full-year 2013, an increase of 5 percent compared with the prior year.

For the fourth quarter of 2013, Office Depot reported an operating loss of $118 million, compared with operating income of $5 million in the fourth quarter of 2012, and a net loss attributable to common stockholders of $144 million, compared with a net loss of $17 million in the fourth quarter of 2012. The reported results include merger-related expenses, asset impairment and other charges.

For the full-year 2013, Office Depot reported an operating loss of $205 million, compared with an operating loss of $31 million in the full-year 2012, and a net loss attributable to common stockholders of $93 million, compared with a net loss of $110 million in the full year 2012.

In its North American retail division, which includes former OfficeMax U.S. retail business, sales in the fourth quarter of 2013 increased 31 percent to $1.4 billion compared with the fourth quarter of 2012, primarily reflecting $384 million of sales from the OfficeMax stub period. Same-store sales decreased 4 percent primarily due to lower average order values, and lower transaction counts resulting from decreased store traffic.

The division’s operating loss was $8 million in the fourth quarter of 2013, compared with the same loss of $8 million in the fourth quarter of 2012.

Office Depot ended 2013 with a total of 1,912 retail stores in the North American retail division, comprised of 1,089 Office Depot-branded locations and 823 OfficeMax-branded locations. During the fourth quarter of 2013, the company closed 16 Office Depot stores and seven OfficeMax stores, and opened one store under each brand.

Roland Smith, chairman and CEO of Office Depot, noted that since the Nov. 5, 2013, merger was completed, “We expect to complete a comprehensive reorganization of the company by the end of February 2014” and the management team has “validated and increased the expected total annual run-rate of previously quantified cost synergies to be more than $600 million by the end of 2016.”

Smith added, “For 2014, we are committed to delivering not less than $140 million of adjusted operating income.”

For 2014, market trends are expected to remain challenging across product lines and distribution channels, the company said. Consequently, Office Depot expects total company sales to be lower than 2013 pro forma combined sales. The expense deleverage from lower sales is expected to offset some of the merger synergies and operating improvements anticipated during the year. The company expects to generate adjusted operating income of not less than $140 million.