Shares of office products and services provider Office Depot, Inc. (ODP) tumbled Tuesday morning after the company warned of margin pressure due to challenging economic conditions.
The stock plummeted 33%, plunging $3.46 to $6.95 a share by 11:10 am Eastern Time. Shares of the Delray Beach, Florida-based company broke through support and hit their lowest level since December 2000.
Before the opening bell on Tuesday, Office Depot projected a higher-than-expected decline in its EBIT margin for the second quarter on ailing sales trends. The company also said it anticipates the economic conditions to be difficult over the balance of the year. However, the firm expects profit margins to improve in the third and fourth quarters.
The company's second-quarter EBIT margin are estimated to fall by 200 basis points, more than the 200 to 250 basis point decline previously indicated on a year-over-year basis.
Office Depot also said total sales decreased slightly with a nearly 10% decline in North American retail same store sales. The company attributed the lower sales to additional pressure from weakening business conditions in the second quarter. Wall Street analysts forecast earnings of $0.21 per share on sales of $3.64 billion.
Further, Office Depot stated it is disappointed with these preliminary results, but will continue to push ahead with the implementation of its strategic plans and margin expansion initiatives. The company is scheduled to release second-quarter earnings on July 30.
For the first quarter, Office Depot's profit declined sharply, weighed down by lower sales in its North American retail and business solutions divisions. On an adjusted basis, the company's earnings per share fell more than 50%. Quarterly sales totaled $3.96 billion, 3% lower than $4.09 billion reported in the prior-year first quarter. The North American retail division reported sales decline of 7%, while the Business Solutions division's sales dropped 5%.
Among Office Depot's competitors, OfficeMax Inc. (OMX) is expected to earn $0.23 per share in the second quarter on sales of $2.05 billion, according to analysts.
Meanwhile, Staples, Inc. (SPLS), which recently agreed to buy its Dutch rival Corporate Express N.V. (CXP) for 9.25 euros per share in cash, is expected to report second-quarter earnings of $0.25 per share with sales totaling $4.50 billion. While announcing the first-quarter results in May, Staples has projected flat earnings per share growth for the second quarter.
Staples also said then that it expects the weakness in economic climate to continue throughout 2008. Based on this and its continued investment in growth initiatives, the company confirmed its full-year 2008 forecast.
Staples said it still expects to achieve mid single-digit sales growth and high single-digit earnings per share growth for 2008, excluding the impact of a lawsuit settlement on last year's results.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.