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http://www.reuters.com/article/bondsNews/idUSBNG46036420090728
OFFICE DEPOT’s LACKLUSTER Q2 RESULTS
* Q2 loss $0.22/shr vs. Street est. loss $0.12
* Sales to small businesses, consumers fall in slump
* Sees “modest” EBIT loss for second half of 2009
* Sees competition intensifying this back-to-school
* Stock down 20 pct; drags shares of Staples,
BANGALORE,
Aug 09 – Office Depot Inc reported a bigger-than-expected quarterly
loss and warned of a “modest” loss in earnings before interest and tax
in the second half of 2009 as the recession weighs on sales at the No.
2 U.S. office supplies retailer.The lackluster results dragged its
stock down as much as 20 percent, making it one of the top percentage
losers on the New York Stock Exchange. The results also weighed on
shares of rivals OfficeMax Inc and industry leader Staples Inc.Office-supply
sellers have been struggling as consumers and small businesses become
frugal in the economic downturn. Sales of big-ticket items such as
furniture and computers have been particularly dismal.Office Depot’s
disappointing results came even as prices were somewhat stable and as
it pushed vendors for additional support, Credit Suisse analyst Gary
Balter wrote in a note to clients.”Without these two factors one
wonders just how weak results would have been,” Balter, who rates the
shares “neutral,” said.”Investors searching for a secondary player in
the sector would do better with OfficeMax and those looking for
leadership in the sector would be better with Staples as an
investment,” he added.The second-quarter net loss at Boca Raton,
Florida-based Office Depot widened to $82 million, or 31 cents a share,
from $2 million, or 1 cent a share, a year earlier.Excluding charges,
it reported a loss of 22 cents a share, while analysts, on average, had
expected a loss of 12 cents, according to Reuters Estimates.BACK-TO-SCHOOL BLUES
This
year, the back-to-school season takes on even more importance for
office supply retailers, as cutbacks in Corporate America have hurt
sales to business customers.
Office Depot, which sees this
back-to-school season being highly promotional, said it expects
competition to be “very aggressive” in what should be one of its
busiest selling periods.
Wal-Mart Stores Inc has expanded its
laptop selection by 40 percent and announced plans to be aggressive in
pricing computers and the accessories that go with them.
Unlike the
first quarter in which Office Depot posted a surprising profit on
strict expense control, cost-cuts failed to offset the sales volume
decline in the second quarter.
While sales fell 22 percent to $2.8
billion, operating expenses — adjusted for charges — fell $143
million in the latest second quarter.Office Depot has laid off workers,
closed stores and distribution centers and trimmed capital spending in
a bid to slash costs in the slump.Sales at U.S. and Canadian
stores open at least a year, a key measurement of retailer health, fell
18 percent.The company reduced promotions at its North American stores,
which also hurt sales.The London-based private equity firm BC Partners
invested $350 million in Office Depot last month, relieving some
concerns regarding the company’s ability to repay debt. Office Depot
said it was continuing to pursue other internal sources of
liquidity.The company, which took pretax charges of about $35 million
in the quarter, sees between $85 million and $115 million in additional
charges for the rest of 2009.Office Depot shares fell to a low of
$4.33, down more than 19 percent in early afternoon trade on the New
York Stock Exchange. OfficeMax’s stock was down 47 cents at $7.17,
while shares of Staples were 50 cents lower at $20.91.
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