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Office Depot Posts $29M Q2 Loss

Boca Raton, Fla. –
Office Depot said restructuring charges and improvement costs contributed to a
$29 million loss for its second quarter, ended June 25.

Total sales were
flat at $2.7 billion, but declined 2 percent without the benefit of favorable
currency fluctuations and excluding sales related to dispositions and
deconsolidation over the prior two quarters.

Earnings before
interest and taxes (EBIT), adjusted for the $20 million in in pre-tax charges,
were $11 million, compared with a year-ago EBIT loss of $23 million. The charges
were primarily related to restructuring activities and other costs intended to
improve efficiency and operations, the No. 2 office-supply chain said.

“Our second-quarter
2011 operating results improved vs. the prior year due to the successful
execution of our key initiatives throughout the company,” said chairman/CEO Neil
Austrian. “We are pleased with the progress across the enterprise and our
associates will continue to direct their efforts toward achieving our goals.”

Within the
company’s North American retail division, sales declined 2 percent to $1.1
billion and comp-store sales slipped 1 percent due to weaker sales of computers
and related products and fewer transactions. Operating profit fell nearly 67
percent to $3 million, reflecting $12 million in severance and closure costs as
the company shut its 10 remaining Canadian stores. Excluding the charges,
operating profit was up nearly 67 percent to about $15 million, due to gross
margin improvements including lower property costs, reduced advertising
expenses and changes in the chain’s private-label credit card program.

During the period,
the division closed 14 stores, opened four stores and relocated four stores,
bringing the total North American store count to 1,131 locations as of June 25.

Office Depot also
extended and modified its credit agreement with lenders during the second