Office Depot begins turning the corner

Office Depot continued to reduce the size of its losses during the fourth quarter, even as the sales environment remains challenging. The company said fourth-quarter sales decreased 6% to $3.1 billion, while a net loss of $77 million was substantially improved over the $1.54 billion loss recorded in the fourth quarter the prior year. The company reported a loss of 28 cents a share, compared with a loss of $5.64 in the same period one year ago. However, when adjusted for charges related to a previously announced restructuring, the fourth-quarter earnings were 6 cents a share compared with a prior-year loss of 73 cents.

“Our fourth-quarter operating results and cash flow performance exceeded our expectations due to stronger than anticipated sales in our North American Retail and International businesses. We remain pleased with the execution of our strategic initiatives across the entire enterprise,” said CFO Mike Newman.

The company’s North American Retail Division saw sales decline 9% to $1.3 billion due to a 4% same-store sales decline and the fact that store closures left the company with 115 fewer units in the fourth quarter of 2009 compared with the prior year. Consistent with previous quarters, the company said the decrease in comparable-store sales was driven by macroeconomic factors as consumers and small business customers continued to hold back their spending, especially in higher-priced, discretionary categories like furniture.

Despite the spending pressures, the retail group generated a meager operating profit of $2 million, compared to a prior year loss of $119 million, due largely to comparisons against a prior period that included a $78 million asset impairment charge.

Office Depot operated 1,152 North American retail stores at the end of its fiscal year on Dec. 26, 2009.