Boca Raton, Fla. - Office Depot's third-quarter earnings nearly tripled to $92 million thanks to a one-time tax and interest benefit, while net sales slipped 2 percent for the three months, ended Sept. 24.
The benefit was a reversal of approximately $99 million of combined tax and interest accruals for uncertain tax positions, the No. 2 office-supply chain said. Excluding the benefit and a one-time charge of $6 million in restructuring and operational improvement costs, the company would have posted a net loss of about $700,000.
Within its North American retail division, net sales fell 4 percent to $1.2 billion, reflecting the closing of Canadian stores, and comp-store sales decreased 2 percent due to weakness in computers and related products. Comp sales were strongest in tech support and office supplies.
North American operating profit rose 40 percent to $42 million thanks to gross margin improvements from a higher sales mix of supplies vs. CE products, as well as better management of pricing and promotions and lower property costs.
"I'm pleased with the traction we're getting in our North American businesses despite a lackluster U.S. economy," said chairman/CEO Neil Austrian. "The successful execution of our key business initiatives is beginning to move the needle."
In a research note, Credit Suisse retail analyst Gary Balter said the 25-year-old company is making "meaningful internal strides" thanks to process improvements that have been underway for the past several quarters, and is realizing positive benefits from "a rigorous re-examination" of each business segment under Austrian's leadership.