OFFICE DEPOT POSTS RECORD GLOBAL SALES

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Office Depot posts record global sales
Only a few years ago, executives with Office Depot Inc. opened their quarterly earnings conferences by talking about almost any number except sales growth, a figure that frequently fell flat.
Here are key points in Office Depot’s plan:
MORE STORES: Office Depot Inc. executives say the company is on track to double the number of stores it has in the U.S. and Canada. Plans call for it to open 113 stores by year’s end, 150 in 2007 and 200 in 2008.

WATCHING STAPLES: Archrival Staples Inc. is expanding by an extra 10 stores in Miami. Office Depot CEO Steve Odland doesn’t dismiss competition in his own backyard, but noted there “will always be some market somewhere that somebody is expanding.”

OFFICE FURNITURE: Office Depot is bullish on profit margins generated by sales of its own lines of office furniture. It plans to add art and carpet to the furniture sales mix.
GLOBAL SALES: The record $3.9 billion in global sales, a 10 percent year-to-year hike, redefines the top line.Even last quarter, sales were sluggish enough to prompt questions about whether the office supply giant was sacrificing growth in favor of capping costs.”I didn’t get those questions this time,” said Pat McKay, chief financial officer for the Delray Beach-based retailer.Small wonder: Propelled by a year-over-year 10 percent hike, Office Depot (NYSE: ODP, $43.06) reported Tuesday that third-quarter global sales hit a record $3.9 billion.Earnings provided another upside surprise. Net income of $133 million, or 47 cents per share, beat consensus estimates of 44 cents per share and wiped out a third-quarter 2005 loss of $47.9 million, or 15 cents per share.Scissoring costs is a hallmark of CEO Steve Odland, who made a name for himself with such trimming at AutoZone Inc.What skeptics had fretted was that Odland would not tend to the top line.”For the first time, we are really seeing acceleration of sales,” said Arun Daniel, a manager with the $40 billion ING Investments LLC fund.There’s more to come, according to company executives. In a morning Web broadcast, Office Depot put hard numbers to its repeated goal of eventually doubling the number of U.S. and Canadian stores.In addition to 115 new stores slated to be opened through the end of the year, plans call for opening 150 next year and an additional 200 in 2008.Analysts peppered Office Depot executives with questions about how they will manage the fast-paced schedule, putting Odland in the unaccustomed role of defending growth, instead of cost cuts.”These are not unusual numbers in the whole scheme of things,” said Odland.Colin McGranahan, an analyst with Sanford C. Bernstein, Inc., termed the time frame “fairly aggressive.” Daniel Binder of Buckingham Research asked whether opening new stores in old markets would cannibalize business.There were questions about whether new stores would be clustered in wide-open markets such as Arizona, which has no Office Depot presence, to barely touched markets in the Midwest or South Florida, where arch rival Staples Inc.  recently announced plans to beef up its own retail sales.Odland, along with other Office Depot executives, seemed puzzled by the emphasis on what has been a well-publicized goal.”We are not changing anything or announcing anything new today,” he said.He also insisted the company is not chasing growth for growth’s sake: “We haven’t. We won’t.

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October 31, 2006 at 1:43 PM