Office Depot beats estimates; raises full-year outlook

Boca Raton, Fla. -- Office Depot on Tuesday reported better-than-expected results for third quarter and raised its outlook for the year.



The retailer posted a profit of $29 million for the third quarter compared with $133 million in the year-ago quarter. The previous-year quarter included a gain on the sale of the Office Depot de Mexico joint venture.



Sales grew 55% to $4.07 billion, fueled by the addition of OfficeMax.



North American same-store sales declined 3% compared to the prior year, primarily due to lower transaction counts. For the remainder of 2014, Office Depot continues to expect challenging market trends and the impact of store closures to negatively impact sales. Therefore, the company continues to anticipate total sales in 2014 will be lower than 2013 combined Office Depot-OfficeMax sales.



The company raised its estimate of total annual run-rate merger synergy benefits to more than $750 million by the end of 2016, compared to its prior outlook of more than $700 million. Office Depot now expects to realize approximately $260 million of merger integration synergies during 2014, compared to its prior outlook of at least $220 million, and to end the year with an annual run-rate of at least $400 million.



Office Depot continues to estimate that $400 million of cash merger integration expenses will be required from 2014-2016. Approximately $300 million will be incurred in 2014. The company anticipates integration capital spending of approximately $200 million from 2014-2016. In 2014, Office Depot expects total capital spending to be approximately $150 million, including $25 million in integration capital expenditures. Depreciation and amortization is expected to be approximately $300 million in 2014.



“Our third quarter results reflect excellence in execution against our critical priorities and merger integration objectives, and we are very pleased to have more than doubled our adjusted operating income from last year’s combined pro forma results,” said Roland Smith, chairman and CEO for Office Depot, Inc. “We continue to make significant progress on merger integration and have exceeded our synergy targets for the quarter."