Office Depot ended 2002 on an up note, posting quarterly and yearly profits, although sales in its North American stores slipped during these periods.
The office supply chain had net earnings of $62.9 million on sales of $2.9 billion for the fourth quarter and a profit of $310.7 million for 2002 on sales of $11.4 billion. Profits for the same periods in 2001 were $40.3 million on sales of $2.8 billion and $201 million on sales of $11.1 billion.
However, its North American retail operation did not fair as well, with sales falling 3 percent in the fourth quarter, ended Dec. 28, to $1.43 billion, from $1.48 billion year over year, and for the 12 months dipped 1 percent to $5.80 billion, from $5.84 billion a year earlier. The company did boost its operating profit for this segment during both periods, to $82.2 million in the three months, from $81 million year-on-year, and to $419.7 million in the 12 months, from $308.3 million the previous year.
Comparable-store sales for the 848 U.S. and Canadian stores declined 4 percent in the fourth quarter, the company said, primarily due to a disappointing 2002 holiday season and falling sales of furniture and technology products. Desktop PCs and notebook sales took a particular beating, falling 17 percent in the fourth quarter and 10 percent for the year. Comp-store sales dipped 2 percent for the year.
Gross margin in North America improved 42 basis points in the fourth quarter and 170 basis points for the 12 months, thanks to a continued product mix shift away from technology, as well as benefits from disciplined SKU/category management and increased sales of private label and globally sourced products.
Based on current sales trends, the company expects North American retail comps in 2003 to remain negative in the first half of the year, but turn flat to slightly positive in the third and fourth quarters.