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Office Depot N.A. Retail Sales Rise 5%

Delray Beach, Fla. — Racking up its ninth consecutive quarter of positive comp-store sales, the North American retail division at office products and services retailer Office Depot increased its quarterly sales 5 percent in the first three months, coming in at $1.8 billion, up from $1.7 billion the previous year. Comps rose 3 percent.

Operating profit in the North American division reached $133.8 million, an increase of 25 percent over the $106.9 million reported in the same three months last year. The current profit hit 7.5 percent of sales, compared with 6.3 percent in the first quarter the prior year.

The higher operating profit in 2006 resulted from broad-based product margin improvements, due to category management initiatives, increased private-label sales, coupled with reduced operating costs from the retailer’s cost management initiatives. Charges negatively impacted operating results for the quarter, ended April 1, by $1 million.

During the first quarter, Office Depot opened four new stores, while closing two locations. At the end of the three months, the chain operated 1,049 units throughout North America.

Consolidated three month sales increased 3 percent, reaching $3.8 billion, up from $3.7 billion. Excluding the effects of foreign currency exchange, total company sales were 5 percent higher than the same quarter in 2005. Overall sales in North America climbed 6 percent.

Net earnings rose to $129.5 million, compared with $115 million year-on-year. Excluding charges, first quarter 2006 profit was $144 million. The quarterly earnings increase was due to better margins and growth in the retailer’s North American business.

In the quarter, gross profit as a percentage of sales edged upward 0.4 percent, to 31.5 percent, due, in part, to increased gross margin in the North American retail division.

Total operating expenses, as a percentage of sales, were 26.5 percent, improving from 26.4 percent in the prior year. Operating profit for the quarter was $192 million, compared with a year-over-year $165 million. First quarter charges negatively impacted operating results by $19 million in 2006.