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Office Depot Fis. Q4 Sales Jump 8%

2/10/2005 08:38:00 AM Eastern

Delray Beach, Fla. — Posting both improved sales and profitability in its North American retail business — including its best retail comp-sales performance in nearly five years — Office Depot claimed a fiscal fourth-quarter North American sales increase of 8 percent, hitting $1.5 billion, up from $1.4 billion in the same quarter in 2003.

North American retail operating profit climbed to $99.5 million in the fourth quarter, ended Dec. 25, more than double the $48.4 million recorded in the previous year.

Improved technology category sales drove a 4 percent positive North American comp-store sales comparison in the fourth quarter over the same three months a year earlier, but this scenario also had a negative impact on product margins. Gross margin in the fourth quarter and full year improved slightly as increased vendor rebates and promotional support and reduced inventory clearance charges were partially offset by a higher mix of lower margin technology products.

North American expenses in the fourth quarter declined as a percentage of sales, mainly because of broad-based operating cost reductions in 2004 and higher facility closure costs in the fourth quarter of 2003.

Comparable average transaction size for North American stores increased in the fourth quarter, but comparable transaction counts decreased for both the fourth quarter and the full year.

“I am pleased to report our best retail comparable sales performance in 19 quarters,” said Neil Austrian, chairman/CEO. “More importantly, our core focus on increasing store profitability yielded improved retail operating margins for both the quarter and the year. We will continue our emphasis on profitable retail growth in 2005 and beyond.”

Office Depot North American sales rose 5 percent in the 12 months, reaching $5.9 billion, up from $5.7 billion in 2003. Comp-store sales increased 3 percent. Operating profit for the 12 months climbed 25 percent to $391 million from a year-earlier $314 million.

The office products retailer continued to expand its North American store base in the fourth quarter, opening 52 new stores, relocating two stores and closing six underperforming locations. In the 12 months, 69 net new stores were opened, with the company reporting a total of 969 office product superstores in the United States and Canada at the end of its just-past fiscal year.

Consolidated Office Depot sales grew 7 percent in the fourth quarter, hitting $3.5 billion, compared with $3.3 billion in the same three months in 2003. Worldwide comp-store sales edged upward 2 percent. Net earnings for the quarter were $52.8 million, up from a year-earlier $45.8 million. Included in fourth-quarter net income were net pretax charges of $65.5 million, primarily resulting from a number of actions taken subsequent to a company-wide cost structure review.

Consolidated 12-month sales jumped 10 percent, reaching $13.6 billion, up from a year-ago $12.4 billion. Worldwide comps inched upward 1 percent. Net earnings were $338.2 million, compared with $276.3 million in 2003. Pretax charges of $60.6 million were included in 2004 net income.

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