OFFICE DEPOT REPORTS A $1.54Bln LOSS IN 4thQ
OFFICE DEPOT REPORTS A $1.54Bln LOSS IN 4thQ
2009-02-25 at 12:24:35 pm #21520
Office Depot posts $1.54 Bln loss in Q4
Office products supplier Office Depot, Inc. Tuesday morning reported a hefty $1.54 billion loss for the fourth quarter compared to a profit last year, hurt by goodwill and impairment charges as well as a 15% sales decline amid lower spending by retail customers in a weak U.S. economy. The tough economy has had its impact on office supplies as well with recession leading to fewer customers and smaller purchases. Following the announcement, the company’s stock is trading down more than 25%.
Fourth Quarter Results
The Delray Beach, Florida-based company reported a net loss of $1.54 billion or $5.64 per share for the fourth quarter, compared to net earnings of $18.77 million or $0.07 per share in the prior-year quarter.The results for the latest quarter include non-cash charges totaling $1.27 billion or $4.54 per share recorded for goodwill and trade name impairments, and pre-tax charges totaling $167 million or $0.37 per share for actions taken as part of the strategic business review announced in December 2008 and the plan announced in 2005.On an adjusted basis, the company reported a net loss of $198.9 million or $0.73 per share, compared to net earnings of $26.6 million or $0.10 per share in the year-ago quarter.On average, fifteen analysts polled by Thomson Reuters expected the company to incur a loss of $0.06 per share. Analysts’ estimates typically exclude special items.Total company sales for the fourth quarter decreased 15% to $3.27 billion from $3.87 billion in the same quarter last year, and missed ten Wall Street analysts’ consensus estimate of $3.47 billion.
Among Office Depot’s peers, Naperville, Illinois-based OfficeMax, Inc.last week reported a fourth-quarter net loss of $396.0 million or $5.21 per share, compared to a profit last year, on significant non-cash charges, particularly related to impairment of goodwill, trade names and store fixed assets in the contract and retail segments. On an adjusted basis, the company’s profit plunged, while total sales declined 14.3% to $1.88 billion from $2.2 billion last year.Another larger peer, Framingham, Massachusetts-based office products giant Staples Inc. is scheduled to release fourth quarter financial results on Wednesday, March 11. Analysts project earnings of $0.42 per share, lower than last year’s $0.47 per share, on revenues of $6.85 billion that represents a growth of 28.6% from prior year’s $5.32 billion.
North American retail division sales dropped 17% to $1.39 billion from the year-ago quarter, while comparable store sales in the 1,207 stores in the U.S. and Canada decreased 18%. Operating loss for the segment was $119.3 million, compared to operating profit of $23.5 million a year ago.Meanwhile, the North American business solutions division reported a 14% decline in sales to $919.8 million from the prior-year quarter. Segment operating loss was $28.2 million, compared to operating profit of $0.8 million last year.The International division also reported a 15% decline in sales to $963.5 million from the same quarter last year, while sales in local currency decreased by 4%.Operating profit for the segment dropped to $10.0 million from $59.6 million last year.
Operating loss for the fourth quarter was $1.65 billion, sharply wider than $11.12 million in the prior-year quarter.Gross profit for the quarter was $829.1 million, down from $1.02 billion in the year-ago quarter, while gross margin percentage declined 100 basis points to 25.4% from 26.4% in the year-ago quarter.Expenses for the third quarter include goodwill and trade name impairments charge of $1.27 billion and other asset impairments of $202.52 million.The company ended the fourth quarter with cash and cash equivalents of $155.75 million, compared to $222.95 million at end of the prior-year quarter.
During the fourth quarter, Office Depot opened two new stores, closed ten, and relocated one store, bringing the total store count to 1,267. The company also remodeled eleven tores in the quarter.In December, the company said it anticipates taking charges in the fourth quarter 2008 and in 2009 totaling in a range between $270 million and $300 million, related to the planned closure of 112 underperforming retail stores in North America within three months, reducing Office Depot’s North American store base to 1,163, as well as cash and future cash charges comprising principally of fixed asset write-offs and lease reserves on closed stores.
Office Depot, with annual sales of approximately $15.1 billion, and about 49,000 employees, then had noted that it is contemplating further actions, which are expected to result in additional charges to be recognized in the fourth quarter of 2008 and into 2009. These actions include the assessment of tangible and intangible assets, including the annual goodwill evaluation, and potentially restructuring businesses.
For fiscal 2008, Office Depot reported a net loss of $1.48 billion or $5.42 per share, compared to net earnings of $395.62 million or $1.43 in the prior year.Adjusted loss for the period was $112.7 million or $0.41 per share, compared to net earnings of $423.8 million or $1.54 per share in fiscal 2007. Analysts expected the company to report full-year 2008 earnings of $0.23 per share.Sales for the year decreased 7% to $14.50 billion from $15.53 billion in the previous year. The Street was looking for revenues of 14.69 billion for fiscal year 2008.
In Tuesday’s regular trading session, ODP is trading at $1.08, down $0.37 or 25.52% on a volume of 4.43 million shares. The stock has been trading in a broad range of $1.45 to $14.39 in the past 52 weeks.