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Office Depot's Q4 Sales Drop In N.A.

2/23/2004 02:00:00 AM Eastern

Retail sales at Office Depot's North American stores segment slid 3 percent in the fourth quarter, dropping to $1.39 billion, from $1.43 billion in the year-ago period. Comp-store sales for the 870 locations throughout the United States and Canada declined 4 percent in the three months.

Fourth-quarter operating profit for North American Office Depot stores decreased to $48.4 million, from $82.2 million in the same three months in 2002. Gross margin in the fourth quarter, ended Dec. 27, was primarily impacted by increases in clearance activity as the retailer prepared for new retail merchandising initiatives.

For the 12 months, North American segment sales slid to $5.7 billion, down from $5.8 billion year-on-year, while segment-operating profit reached $314 million, compared with $419.7 million in 2002.

However, Office Depot's delivery business and international operations was more than enough to make up other shortfalls, increasing consolidated fourth-quarter sales by 14 percent, to $3.3 billion, from $2.8 billion, with net earnings dropping to $45.8 million, from $62.9 million. The company attributed lower quarterly profit to charges on real estate and investments. The fourth quarter of 2003 included $32.4 million in charges.

For the 12 months, Office Depot sales grew 9 percent, hitting $12.4 billion, compared with $11.4 billion in 2002. Net earnings were $276.3 million, compared with $310.7 million, but 2003 included the $32.4 million charge.

Office Depot expects its North American retail business to "comp positive" in the first quarter of 2004, and to "accelerate throughout the year." The growth curve should benefit from new merchandise assortments and initiatives, new store formats, a potentially aggressive store remodeling program and the accelerated openings of new and smaller stores in core markets.

The retailer said its anticipates growing worldwide revenue in excess of 10 percent in 2004, with North American retail looking at sales growth in the 6 percent to 8 percent range, with positive comps in every quarter. The company is looking to open 70 to 80 new stores and complete 50 to 60 Millennium store remodels in North America this year.