Boston, MA 05/28/2014 (wallstreetpr) – Office Depot Inc (NYSE:ODP) witnesses challenge in delivering growth and closing most of their stores despite leading position worldwide in office products. The Company believes that the closer plan will be accretive to its earnings by 2015.
The inclusion of OfficeMax is yet to reflect on the Company’s operating metrics. Recently, Office Depot reported a disappointing performance in its 1Q2014 compared to combined pro-forma results in 1Q2013.
Operating metrics
During the first quarter, total sales were $4.4 billion, down by 3% due to the reflection of sales decline across its divisions (1Q2013: $4.5 billion).
North American Retail division sales decreased by 5% YoY to $1.8 billion (1Q2013: $1.9 billion), due to 3% YoY decline in same store sales resulted from lower transaction counts, which was partly offset by higher average order values. But, lower operating expenses improved the segment’s operating income to $37 million.
On a pro-forma basis, Business Solutions division also reported 2% YoY decrease in sales to $1.5 billion. But, the segment operating income was $40 million during the period. Similarly, the International sales were down by 1% at constant currency to $1.0 billion with operating income of $20 million in 1Q2014.
The declining sales compressed the gross margin by 68 basis points, but, lower SG&A costs associated to sales improved the adjusted operating income by 33% to $72 million (1Q2013: $54 million). Consequently, it raised the adjusted net income significantly (111%) to $0.07 per share from $0.03 per share in 1Q2013.
Available liquidity
Office Depot had available liquidity of ~$2 billion including cash of $870 million and $1.1 billion as available credits and total debt of $720 million as of March 29, 2014.
Office Depot generated $74 million cash from operations and capital expenditures of $39 million, resulting to free cash flow to $35 million. In addition,Office Depot Inc (NYSE:ODP) also received $22 million from the sale of securities during 1Q2014.
Long-term outlook
Office Depot expects growth opportunity from the merger that will optimize the store portfolio and improve its operating performance. Therefore, Office Depot Inc (NYSE:ODP) raised the outlook for the adjusted operating income to $160 million and above in FY2014.
