Office Depot N.A. Sales Rise 3%, Profit Up 7%

By Jeff Malester On Oct 25 2004 - 6:00am

Despite softer than expected back-to-school business, office supplies retailer Office Depot recorded a 3 increase in its North American sales during the third quarter, hitting $1.49 billion, up from $1.45 billion in the year-ago period. Improved technology category sales drove up North American retail comp-store sales 1 percent.

Office Depot's North American retail segment operating profit climbed 7 percent in the third quarter, ended Sept. 25, reaching $107.9 million from $101 million the previous year. However, gross margin remained flat as a percentage of sales during the three months, as broad-based category gross margin percentage improvements were offset by an increased sales mix of lower margin technology products,

Office Depot, which enjoyed its third consecutive quarter of positive retail comps, said its focus on increasing store profitability is beginning to produce meaningful outcomes, as it has made this one of its highest priorities.

During the third quarter, Office Depot opened 24 stores, closed two and relocated six office supply stores. The retailer operated 923 office products superstores in North America at the end of the third quarter.

For the nine months, North American sales rose 4 percent to $4.4 billion from $4.3 billion, while comps increased 2 percent in the period. Segment operating profit climbed 10 percent in the nine months, reaching $291.5 million, compared with $265.6 million in the same nine months a year earlier.

Consolidated Office Depot sales in the third quarter increased 3 percent, to $3.3 billion, from $3.2 billion, as softening in the retailer's European business, disruptions associated with several U.S. hurricanes and lower than expected back-to-school sales took their toll. Worldwide comps were flat, while net earnings slipped to $89.9 million, from $91.7 million, off nearly 2 percent.