Delray Beach, Fla. - Impacted by a disappointing back to school season and ongoing negative sales comps in furniture and technology products, such as computers, Office Depot reported a 1 percent third quarter sales decline for its North American Retail segment.
Sales reached $1.46 billion for the three months, down from $1.47 billion in the year-ago period. Comp store sales in North America dipped 2 percent in the third quarter.
However, the office products retailer increased its third quarter gross profit at North American stores, to $375.4 million, up from $358.8 million in the same three months in 2001. Gross margin jumped 129 basis points in the third quarter, due to what the company called further improvements from better buying, globally sourced back to school products and sustainable benefits generated through SKU/category management and re-merchandising efforts.
'While our North American retail sales results have not met our expectations, the business continued to perform exceedingly well,' said Bruce Nelson, chairman/CEO. 'Gross margins continued the positive trends of the past four quarters, and our North American retail business is well positioned to benefit from any incremental lift in the current economic climate.'
Total Office Depot sales in the third quarter grew 4 percent, hitting $2.9 billion, up from $2.8 billion in the year-ago three months.
Operating income rose 41 percent in the third quarter, ended Sept. 28, reaching $142.1 million, compared with $100.8 million in the third quarter of 2001. Net income for the period rose to $88.2 million, up from $62.5 million year over year.
For the nine months, North American Retail division sales were relatively flat, reaching $4.38 billion, compared with $4.36 billion in the same period in 2001. Comp sales declined 2 percent. Gross profit rose to $1.1 billion, up from $1 billion the previous year, while gross margin improved by 213 basis points in the same time frame.
Year to date overall Office Depot sales climbed 3 percent, to $8.5 billion, up from $8.3 billion in the same nine months last year. Operating income increased 44 percent, hitting $397.8 million, compared with $276.1 million in the same nine months in 2001. Net earnings year to date reached $247.8 million, up from $160.8 million year-on-year.
Looking at the fourth quarter, Office Depot anticipates flat to slightly positive comps in its North American Retail business. While it experienced strong growth in operating income in the third quarter, the company said it does expect some pressure on fourth quarter margins as it increases the mix of technology sales at retail, as well as other factors.