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Office Depot Posts Q1 Net Profit, Lower Sales

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

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

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.