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Office Depot N.A. Sales Rise 10%

10/19/2005 08:00:00 AM Eastern

Delray Beach, Fla. — North American retail sales increased 10 percent at Office Depot in the company’s fiscal third quarter, reaching $1.6 billion, up from $1.5 billion.

Comp-store sales rose 4 percent in the period. Seven stores closed as a result of the two recent hurricanes have been excluded from the comp-store results.

However, Office Depot’s North American retail segment posted an operating loss of $29.9 million in the third quarter, compared with operating profit of $107.2 million in the same period last year. The retailer said charges and option expensing negatively impacted third-quarter operating results by $156 million. Cost efficiencies and improved gross margin were realized during the three months, ended Sept. 24, despite the negative effects of the two hurricanes.

North American retail business accounted for 46.8 percent of Office Depot’s total sales in the third quarter, up from 44.8 percent in the same period last year. During the third quarter, the retailer opened 13 new stores and closed 15 office supply stores. The chain operated 1,009 office products superstores in the United States and Canada at the end of the third quarter.

For the nine months, the North American retail division recorded an 8 percent sales increase, hitting $4.8 billion, up from a year-earlier $4.4 billion. Operating profit in the period reached $199.8 million, down from $289.4 in the same three months the prior year.

Consolidated third-quarter sales rose 5 percent to $3.5 billion, compared with $3.3 billion year-on-year.

Office Deport recorded a $47.9 million consolidated loss in the third quarter, compared with net earnings of $89.3 million the previous year. Third-quarter results include the effects of previously announced charges related to asset impairments, exit costs and other operating items. Excluding options and one-time charges for store closings, the retailer reported it earned $115 million in the third quarter.

For the quarter, gross profit as a percentage of sales was 30 percent, down from 31.3 percent in the same period last year. Operating expenses as a percentage of sales moved up to 32.7 percent in the quarter, from 27.3 percent year-over-year.

In the nine months, Office Depot sales reached $10.6 billion, compared with $10.1 billion in the same period a year earlier. Net income for the nine months dropped to $167.5 million, down from $283.4 million in the same period the prior year.