Office Depot’s Q4 Losses Top $1.5B

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Boca Raton, Fla. — Office Depot said a series of one-time charges led to a $1.5 billion net loss during its fourth quarter, ended Dec. 27.

The loss would have been $199 million without the charges, which included $1.3 billion in goodwill and trade name impairments and $169 million for a strategic restructuring that included store and distribution center closings, job cuts and asset write-downs.

An additional $125 million in pretax charges reflect the impairment of Office Depot’s North American retail stores amid the business downturn.

Operating expenses, adjusted for the charges, increased by $42 million during the quarter, and cash flow from operations was $30 million.

Net sales declined 15 percent to $3.3 billion during the period and fell 17 percent to $1.4 billion at its North American stores. Same-store sales in the United States and Canada tumbled 18 percent amid what chairman/CEO Steve Odland described as a significant cutback in spending by customers.

The company said business in California deteriorated during the quarter, and that while Florida remains its weakest market, sales there are declining at a slower pace than in the rest of the country.

The North American retail unit had an operating loss of $119 million, due largely to sales declines; a non-cash asset impairment charge of $78 million; and additional reserves for store closures, inventory and the company’s private label credit card. 

The decline was partially offset by improved product margins, the company said.

During the quarter, Office Depot opened two new stores, closed 10 and relocated one, bringing the total North American store count to 1,267.  The company also remodeled 11 locations during the period.

Inventory per store was $689,000 at the end of the quarter, down about 28 percent from the year-ago period as the company aligned its inventory investment with sales levels in the current economic environment.

The company said its restructuring program should free up $105 million in cash this year, and that it is "actively pursuing" other internal sources of liquidity in 2009, including sale leasebacks of owned properties in the U.S. and Europe.

Office Depot operates 1,713 stores worldwide in addition to a $4.8 billion e-commerce operation.

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