Office Depot swings to loss in Q2 but still beats Street

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Office Depot swings to loss in Q2 but still beats Street

By Marianne Wilson - 08/07/2019
Office Depot’s ongoing transformation to a more business-services oriented company continues to be a drag on its bottom line, even as the company managed to beat analysts’ expectations.

The company reported a net loss of $24 million, or $0.04 per share, for the quarter ended June 29, compared to net income of $19 million in the year-ago period. Adjusted earnings were $0.07 cents per share, beating the $0.05 analysts had expected.

Revenue fell 2% to $2.59 billion, in line with expectations. Revenue in the retail division fell 5% to $1.0 billion,  driven by a 4% decline in same-store sales combined with 54 fewer retail stores and a 7% sales decline in the CompuCom division.

Retail product sales in the quarter declined 7% compared to the prior period, primarily due to lower sales volume, while service revenue increased by 7% compared to the prior year period. On a same-store basis, service revenue increased by approximately 12%, driven by the expansion of our copy and print services, subscription volume, and technology services.

The company reported an operating loss of $15 million, down from operating income of $48 million in the prior-year period, driven by a $55 million increase in merger and restructuring costs.

“This quarter was a compelling demonstration of how we are implementing our strategy and utilizing our B2B platform to serve our business customers,” said Gerry Smith, CEO of Office Depot. “Our strong operating results were driven by growth in our BSD division [business services division] and improving performance at our CompuCom division. Our strategic focus on our B2B businesses, which consists of our BSD and CompuCom divisions, generated over 60% of our revenue and over 90% of our division level operating income in the second quarter.”

Office Depot closed 39 stores during the second quarter, giving it a total of 1,320 locations in its retail division.

 

 

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