OFFICE DEPOT's NET DROPS 55%

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OFFICE DEPOT's NET DROPS 55%

 user 2008-04-29 at 11:48:22 am Views: 57
  • #19464
    Office Depot’s Net Drops 55%
    Office Depot 1Q profit falls on N. American sales decline
    Office
    Depot Inc. reported a 55% drop in first-quarter net income as weakness
    in Florida and California dug into sales, while competitors continued
    to encroach on the retailer’s territory and new stores cannibalized
    existing ones.The office-supplies giant posted net income of $68.8
    million, or 25 cents a share, down from $153.8 million, or 55 cents a
    share, a year earlier. Excluding charges, profits were 29 cents
    compared with 59 cents.

    Revenue fell 3.2% to $3.96 billion from
    $4.09 billion. The mean estimates of analysts polled by Thomson Reuters
    were for earnings of 22 cents a share on $4.07 billion in revenue.
    Gross profit margin slipped to 29.5% from 31%.Sales in the North
    American retail division slid 7.3% as earnings plunged 46% and
    same-store sales dropped 9%. Weakness in Florida and California
    continued to “weigh heavily” on results amid difficult housing-related
    economic conditions. The two states represent about 26% of total store
    sales and 35% of the same-store-sales drop. Results were also hurt by
    competitors, new stores cannibalizing existing ones, and a shift of the
    Easter holiday to the first quarter from the second.

    Sales in
    the company’s North American business-services segment slumped 5% amid
    a 17% drop in profits as the segment also saw its results stung by
    weakness in Florida and California.International sales increased 5.7%,
    though local-currency sales fell 4% amid weakness in the U.K. and
    France, as earnings dropped 27%. Office Depot said the economic
    slowdown continues to affect operations in the U.K., and sales were
    also impacted by the timing of Easter while earnings were hurt by
    continued investment and consolidation of facilities in Europe.Earlier
    this month, dissident shareholders abruptly dropped a proxy battle
    against Office Depot just days before its annual meeting, contending
    the effort had served its purpose of waking up shareholders. In the
    end, all 12 incumbent directors were re-elected. But the dissident
    shareholders, led by Woodbridge Equity Fund LLLP and Levitt Corp. noted
    last week that about 30% to 40% of shareholders either voted against or
    withheld votes from several directors. The groups said those results
    “sent the board a strong message of disapproval and call for
    change.”Woodbridge and Levitt had asked that shareholders withhold
    their votes for Chairman and Chief Executive Steve Odland and former
    Chairman David Fuente, taking Office Depot officials to task for using
    economic weakness as an excuse for the company’s “persistent
    underperformance.” Still, the company has maintained it is taking every
    step necessary to improve performance and increase shareholder value.
    Office Depot is amid a turnaround plan that includes refocusing sales
    to micro-businesses at its North American stores and streamlining its
    global supply chain.Meanwhile, adding to Office Depot’s financial
    troubles, Standard & Poor’s earlier this month cut its corporate
    credit rating on the company to junk status, citing weakness in North
    America and “expectations that challenging economic trends” will
    continue hurting the company this year.