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Office Depot Posts Flat Q3 Retail Sales

Delray Beach, Fla. – Although Office Depot third-quarter comparable-store North American sales remained slightly negative, the retailer said it is encouraged by increases in traffic and transactions for the same time frame.

North American retail division sales were about flat, declining to $1.45 billion in the three months, from $1.46 billion in the year-ago period. Comp-sales dropped 2 percent.

Office Depot said retail comp sales reflected a solid back-to-school season in the office supply chain’s core supplies category, offset by continued negative comp sales in technology.

Traffic increased 4 percent in the third quarter, but average transaction size was down 5 percent, reflecting ongoing weakness in technology and furniture sales.

Operating profit for the retail division decreased to $101 million in the third quarter, ended Sept. 27, down from $119.9 million in the same three months in 2002.

Office Depot, which operated a total of 879 office products superstores in North America at the end of the third quarter, opened three new locations, closed one and relocated four during the three months. It expects to open 35 new stores in 2003.

Retail division sales for the nine months came in at $4.3 billion, down 3 percent from the $4.4 billion recorded in the same period in 2002. Comp-store sales were off 4 percent for the nine months, while traffic declined 1 percent in the period. Average transaction size decreased 3 percent.

Consolidated Office Depot sales jumped 13 percent in the third quarter, hitting $3.2 billion, up from $2.9 billion year-on-year. The jump was helped by finalization of the company’s purchase of the French office supply business Guilbert SA in June. Operating profit reached $141.5 million, about the same as the $142.1 million reported in the same quarter in 2002. Net earnings were $91.7 million, down from the $88.2 million recorded a year earlier.

For the nine months, consolidated sales increased 7 percent, climbing to $9.1 billion, compared with $8.5 billion in the same nine months a year ago. Operating profit slipped to $384.5 million for the period, down from $397.8 million the previous year. Net earnings hit $230.5 million, off from the $247.8 million recorded year over year.

Looking ahead, Office Depot anticipates flat sales for its North American retail division in year-over-year comparisons. The retailer also expects fourth quarter charges to be in excess of $45 million.