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Office Depot Q1 Sales Drop 6%

4/17/2003 10:13:00 AM Eastern

Delray Beach, Fla. - Office Depot store sales in North America declined 6 percent in the first quarter, with comp-store sales in this region coming in at a negative 7 percent for the three months.

Sales in North America reached $1.5 billion for the first quarter, ended March 29, down from $1.6 billion in the year-ago period.

Operating profit in North American stores for the first three months, which was positively impacted by the adoption of new accounting guidance, hit $118.2 million, down from $134.9 million in the same period in 2002.

The retailer reported that traffic and average transaction size in North American locations were impacted by continued negative sales results in technology and furniture. Technology comparable sales were down 20 percent, with the greatest impact in computer sales. Comp-store sales in furniture were off 5 percent.

Declining sales in Office Depot North American stores played a significant role in overall company profitability. Total company sales in the first quarter grew by 1 percent, to $3.1 billion, up from $3 billion in the same period a year earlier. However, operating profit decreased by 1 percent, to $161.3 million, from $163.6 million year-on-year. Overall comp-stores sales for the quarter dropped by 3 percent.

'Positive results from the first of many new 2003 retail marketing and merchandising initiatives resulted in improving sales trends in late March and April,' said Bruce Nelson, chairman/CEO.

'These early results are encouraging, and combined with additional merchandising initiatives planned over the next two months, lead us to believe that our negative retail comparable sales results in North America have reached the bottom. We expect a meaningful improvement in our comparable store sales results for the second quarter,' said Nelson.

Based on a number of retail merchandising and marketing initiatives implemented in its North American stores during the second quarter, Office Depot expects North American retail comps will be only slightly negative in the third quarter, and positive in the fourth quarter, for the first time in 14 quarters.

The overall outlook for the second quarter, however, is expected to be below the second quarter of 2002. The retailer does not expect to achieve last year's second-quarter profit levels in the absence of positive North American retail comps.

It does expect earnings for 2003 to be up 3 percent to 5 percent over the 2002 results. Yet, these figures are below the company's previous 5 percent to 10 percent forecast.

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