Office Depot Inc. (ODP: Quote) reported Tuesday a wider-than-expected loss in its second quarter, reflecting higher charges as well as lower revenue performance in all its divisions. Sales for the quarter also missed Street estimates. However, the office products supplier's gross profit margin increased approximately 40 basis points.
Chairman and Chief Executive Officer Neil Austrian said, "Although the second quarter was challenging from both a revenue perspective and a year-over-year results comparison due to significant non-recurring benefits in 2011, we continued to execute our key initiatives and increased gross margin for the fifth consecutive quarter."
Segments were soft for the quarter, as the North American retail division recorded an 8 percent decline and North American Business Solutions division down 1 percent. Sales at International division declined 13 percent from the prior year.
On August 2, Office Depot's peer OfficeMax Inc. (OMX: Quote) said it turned to a profit in its second quarter compared to last year's loss, as adjusted total sales increased 0.3 percent.
For the second quarter, Office Depot's net loss available to common shareholders was $64.28 million or $0.23 per share, compared to prior year's loss of $29.33 million or $0.11 per share.
The latest quarter results included $9 million restructuring charges and nearly $24 million asset impairment charge, partly offset by a $16 million tax benefit associated with a U.S. Internal Revenue Service ruling. The prior year's results were hurt by about $20 million of restructuring charges.
Adjusted net loss, which excluded items, would have been nearly $40 million or $0.14 per share, compared to a loss of $16.5 million or $0.06 per share in the previous year. On average, 18 analysts polled by Thomson Reuters expected loss of $0.08 per share for the quarter. Analysts' estimates typically exclude one-time items.
Total company sales declined 7 percent to $2.51 billion, while analysts were looking for revenues of $2.61 billion. On a constant currency basis, sales slid approximately 5 percent from the prior year.
Total company gross profit margin increased to 29.8 percent from last year's 29.3 percent.
Segment-wise, the North American Retail Division's sales fell 8 percent reflecting a decrease of approximately 200 basis points related to the store closures in Canada and the U.S. , and another 200 basis point decrease from the calendar shift impacts in 2012. Comparable store sales in the 1,094 stores that have been open for more than one year, decreased 4 percent, yet a sequential improvement from the 6 percent decline in the first quarter. The sales of computers and related products were hurt in the quarter as customers switched from laptop computers to tablets.
The North American Business Solutions' operating profit was benefited from about 60 basis points of higher gross margin and lower supply chain costs, partially offset by higher payroll costs to support the sales organization and a legal accrual.
The International division's sales fell due to fewer working days and as European contract channel sales decreased with growth in the U.K. and Germany offset by lower sales in other European countries. Contract channel sales in Asia increased.
Office Depot's Latin American joint venture, Office Depot de Mexico, also reported lower sales.
In pre-market activity, the shares declined 0.6 percent and are trading at $1.73.
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by RTT Staff Writer
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