*NEWS*OFFICE DEPOT’s WEAK 3RD QUARTER

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*NEWS*OFFICE DEPOT’s WEAK 3RD QUARTER

 user 2007-09-28 at 11:57:00 am Views: 55
  • #18814

    Depot shares hit by weak Q3 forecast
    September 2007 — Delray Beach (FL): Office Depot’s share price dropped sharply by 8.7 percent from $21.9 to $20.03 on Friday.
    The
    fall came a day after Depot senior management told the Goldman Sachs
    retailing conference that they expect to see a double-digit decline in
    Q3 earnings. Depot’s CFO Patricia McKay said that the company
    anticipates both Q3 and Q4 earning to fall below 2006 levels (Q3 net
    earnings were $133 million).The company attributes the decline to weak
    performance by its North American retail stores and its delivery
    business. These have been negatively affected by “small business
    spending weakness and pressure from a softening housing market,” says
    Citigroup analyst Bill Sims.

    Citigroup’s most recent analysis on
    Depot also points out that “a greater promotional atmosphere is
    increasingly pressuring margins”.However the analysts believe that
    Depot’s soft earnings are a symptom of the broader macroeconomic
    environment and insist that the retailer is neither ceding massive
    share nor facing major structural problems.In light of its weak
    performance, Depot has re-evaluated some of its expansion plans in a
    bid to curb costs. Depot has cut the number of new stores it will open
    this year to roughly 100 from the originally planned 150. And
    similarly, 2008 will now see the opening of between 125 and 150 new
    stores, rather than the previously announced figure of 200.Depot rivals
    Staples and OfficeMax also saw their stock fall on Friday. Overnight,
    Staples stock fell by 2.9 percent from $23.08 to $22.40 and OfficeMax’s
    stock fell by 4.8 percent from $35.04 to $33.34.Staples boss Ron
    Sargent, also speaking at the retail conference, said that although the
    Framingham-based retailer has observed the effect of the sagging US
    housing market on its retail consumers, it has not observed the same
    effect on its small business customers.