Office Depot Posts Q1 Net Profit, Lower Sales

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Boca Raton, Fla. - Office Depot reported a net profit but slightly lower sales in its first quarter, ended March 31.  

Office Depot sales were approximately $2.9 billion, down 3 percent compared with the first quarter of 2011.

Net earnings, after preferred stock dividends, were $41 million in the first quarter, compared with a loss of $15 million in the first quarter of 2011.

First-quarter 2012 results included approximately $23 million of charges primarily related to restructuring activities, lease accruals and actions to improve future operating performance, and approximately $12 million related to the extinguishment of debt in the quarter, the company said.

First-quarter 2012 results also included a $68 million favorable pension settlement related to a 2003 European acquisition recognized as a credit to income and slightly offset by a $5 million expense related to this arrangement.

Excluding the charges, debt extinguishment costs and the favorable pension settlement, first-quarter 2012 net earnings, after preferred stock dividends, would have been approximately $14 million.

"Our first-quarter 2012 results showed continued year-over-year earnings improvement despite lower sales," said Neil Austrian, chairman/CEO of Office Depot.

In the North American retail division, first-quarter sales were $1.2 billion, a decrease of 8 percent compared with the prior year. Because fiscal year 2011 was a 53-week year ending on Dec. 31, first-quarter 2012 sales benefited from having fewer selling days impacted by holidays compared with the first quarter of 2011. However, store closures throughout 2011, including the 10 remaining stores in Canada during the second quarter of 2011, negatively impacted total sales for the first quarter of 2012. After considering the holiday shift and store closures, it is estimated that the combined impact on first quarter 2012 sales would have been approximately neutral.

Same-store sales in the first quarter of 2012 from the 1,096 stores that have been open for more than one year decreased 6 percent. The decline in comp sales of computers and related products contributed significantly to the division's overall comparable sales decline. The decline reflects the division's continued focus on improving the profitability of the business by taking a more strategic approach to the product assortment, pricing and promotion, the retailer said.

Excluding sales of computers and their related products, same-stores sales would have been flat in the first quarter 2012.

Office Depot said it saw increasing sales in tablets and e-readers during the quarter. Customers switching from laptop computers to tablets contributed to lower sales but improved product margins. Furniture sales were lower in 2012 compared with the first quarter of 2011, reflecting promotional activity last year that was not repeated.

The North American retail division reported first-quarter 2012 operating profit of approximately $44 million, compared with approximately $58 million in the same period of 2011.

At the end of the first quarter of 2012, Office Depot operated 1,123 stores in the U.S. and Puerto Rico. The division opened one new store and closed nine during the first quarter of 2012.


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