Office Depot

BOCA RATON, Fla. Total Company sales for the second quarter decreased 22% to $2.8 billion. Total Company operating expenses, adjusted for Charges, decreased by $143 million from the second quarter of 2008. EBIT, adjusted for Charges, was a loss of $62 million in the second quarter of 2009 or negative 2.2% as a percentage of sales, compared to a positive $21 million or 0.6% as a percentage of sales in the prior-year period.

The Company reported a net loss of $82 million in the second quarter of 2009, compared to a net loss of $2 million in the same period of 2008. The loss per share was $0.31 for the quarter, versus a loss per share of $0.01 in the second quarter of 2008. Adjusted for Charges, the Company reported a loss of $60 million and a loss per share of $0.22 for the second quarter of 2009, versus earnings of $10 million and earnings per share of $0.04 in the same period one year ago.

In the second quarter of 2009, the Company’s cash flow from operations was $9 million and cash flow before financing activities was $55 million.

“Second quarter business results met our expectations given the challenging economic conditions and the period’s normal seasonality,” said Mike Newman, Office Depot’s chief financial officer. “However, the successful execution of our liquidity initiatives generated positive cash flow before financing activities in the second quarter, significantly exceeding our expectations.”

(1) Includes non-GAAP information. Second quarter results include impacts of previously announced programs (“Charges”). Additional information is provided in our Form 10-Q filing. Reconciliations from GAAP to non-GAAP financial measures can be found in this release, as well as on the corporate web site, www.officedepot.com, under the category Investor Relations.

North American Retail Division

Second quarter 2009 sales in the North American Retail Division were $1.1 billion, down 21% compared to the same period last year, due in part to having 114 fewer stores open in the second quarter of 2009 versus the prior year period. Comparable store sales in the 1,138 stores in the U.S. and Canada that have been open for more than one year decreased 18% for the second quarter compared to the prior year period. The decrease in comparable store sales was driven by macroeconomic factors as consumers and small business customers continued to reign in their spending, especially on large ticket items like furniture and computers, and the Division’s commitment to proactively reduce promotions in certain low margin categories.

The North American Retail Division had an operating loss of $13 million for the second quarter, compared to an operating loss of $4 million reported in the same period of the prior year. The increased operating loss was driven by the impact of the sales volume decline outpacing the benefits related to reduced operating expenses, lower charges for shrink and inventory valuation, the comparative benefit from closing the underperforming stores identified as part of the strategic review and an improvement in product margins for the fourth straight quarter.

During the second quarter, Office Depot closed five stores, opened three and relocated one store, bringing the total store count for North America to 1,158 as of June 27, 2009.

Inventory per store was approximately $714 thousand at the end of the second quarter of 2009, down about 21% from the prior year. This decrease is primarily due to improved inventory management and reduced exposure to big ticket inventory items.

North American Business Solutions Division

Second quarter 2009 sales in the North American Business Solutions Division were $868 million, down 18% compared to the same period last year, driven by continued significant spending cuts across the Division’s customer base.

The North American Business Solutions Division reported an operating profit of $23 million for the second quarter of 2009 compared to $49 million for the same period of the prior year. The decrease in operating profit during the second quarter of 2009 primarily relates to the impact of the sales volume decline and the negative impact of product margins, including a less profitable product mix and cost increases that were not fully passed on to customers. Partially offsetting the operating profit decline was a benefit from reduced selling and G&A expenses, lower customer rebates tied to volume and lower charges for shrink.