Office supplies retailer Office Depot Inc. (ODP) on Thursday reported a sharply wider net loss for the third-quarter, hurt mainly by a hefty income tax expense and lower sales. Adjusted net loss, although widened from last year, was less than analysts had expected.
The company reported a third-quarter net loss available to common shareholders of $412.97 million or $1.51 per share, compared to a loss of $6.70 million or $0.02 per share reported in the same quarter last year.
Adjusted for charges for deferred tax asset valuation allowances and the reversal of tax benefits recognized during the first half of 2009, and charges related to restructuring actions, net loss for the quarter was $21.3 million or $0.08 per share, compared to a loss of $1.7 million or $0.01 per share in the year ago quarter.
On average, 17 analysts polled by Thomson Reuters expected the company to report a loss of $0.10 per share for the quarter. Analysts' estimates typically exclude special items.
Total sales for the quarter decreased 17% to $3.029 billion from $3.657 billion in the comparable quarter last year. Excluding the impact of foreign currency translation on the International Division, total company sales were down 15%. Analysts expected the company to report revenue of $3.07 billion for the quarter.
The company reported an operating loss of $32.80 million, compared to operating income of $5.76 million in the prior year.
Segment-wise, North American Retail Division generated sales of $1.288 billion, down from last year's $1.579 billion. The sales decline was partly due to the absence of 117 stores from last year. Comparable store sales in the 1,144 stores in the U.S. and Canada decreased 14% for the third quarter, compared to the prior year period, driven by reduced spending, especially in large ticket categories, and the Division's commitment to proactively reduce unacceptable margin promotions in select categories.
The segment's operating profit increased to $35.1 million from $11.9 million, owing to factors such as higher product margins, a comparative benefit from closing underperforming stores, lower asset impairment charges and reduced operating expenses.
At the end of the quarter, the company operated 1,158 stores in the U.S. and Canada, compared to 1,275 in the year-ago period. Inventory per store in the segment was about $669 thousand at the end of the third quarter of 2009, down about 14% from the prior year, primarily due to improved inventory management and reduced exposure to large ticket inventory items.
North American Business Solutions Division had third-quarter sales of $880.4 million, lower than $1.054 billion generated last year, driven by a decrease in the number of customer transactions. The division's operating profit dropped to $21.3 million from $39 million. In the International Division, sales for the quarter declined to $860.6 million from $1.025 billion and operating profit slipped to $34.2 million from $35.9 million.
Cost of goods sold and occupancy costs declined to $2.169 billion from $2.633 billion in the previous year. Income tax expense jumped to $358.40 million from $1.54 million in the prior year.
For the second quarter, the company reported a net loss available to common shareholders, adjusted for Preferred stock dividends, of $82.558 million, wider than last year's loss of $2.002 million. On a per share basis, loss was $0.31 for the quarter, much wider than prior year's loss of $0.01. Total sales for the quarter declined 22% to $2.82 billion from $3.61 billion a year earlier.
For the first nine months of the fiscal, the company reported a net loss available to common shareholders of $550.26 million or $2.02 per share, compared to net income available to common shareholders of $60.07 million or $0.22 per share in the prior year. Sales dropped to $9.079 billion from $11.224 billion in the previous year.
The company said recently in a regulatory filing that in future it would separate the positions of Chief Executive Officer of the company and Chairman of the board, and allow an independent director of the board to serve as the chairperson. The provision will not apply to the company's current CEO Steve Odland, whose employment agreement requires that he also serve as the Chairman. Odland has been serving as Chairman and CEO of Office Depot since March 11, 2005.
Among peers, OfficeMax Inc. (OMX) said today that its third-quarter net income available to OfficeMax common shareholder was $5.65 million or $0.07 per share, compared to a loss of $432.69 million or $5.70 per share in the prior year period. Sales for the quarter declined to $1.83 billion from $2.09 billion in the comparable period.
ODP closed Wednesday's regular trade at $5.91, down from the previous close of $6.29, on 11.03 million shares.
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