*NEWS*OFFICE DEPOT SUPPLIES UPSIDE

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Date: Friday May 5, 2006 11:23:00 am
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    Office Depot Supplies Upside
    Office Depot  posted a 12% rise in first-quarter earnings Tuesday, beating Wall Street’s forecast, as a focus on margin improvements continued to bear fruit.
    The office-supply retailer’s earnings rose to $129.5 million, or 43 cents a share, from $115.3 million, or 37 cents a share, a year earlier. The earnings included 5 cents a share in charges related to costs from closing stores and other items.
    Excluding the charges, Office Depot’s earnings of 48 cents a share topped analysts’ mean estimate by 4 cents, according to Thomson First Call.
    Sales rose just 3% to $3.82 billion from $3.70 billion last year, slightly shy of Wall Street’s target of $3.86 billion. North American retail same-store sales advanced 3%.
    The company’s gross profit as a percentage of sales was 31.5%, a 40-basis-point improvement over a year ago. Gross margin improvements in the North American retail division, which was helped by cost cuts and increased private-brand sales, helped offset a decline in margins at the company’s business solutions segment.
    Office Depot has been undergoing a round of cost-cutting, including store closings and consolidations, after bringing in CEO Steve Odland from AutoZone  last year to help boost profits. At AutoZone, Odland was known for focusing on margin improvements and profitability over sales growth.

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