Office Depot Q2 Earnings Miss Estimates; Maintains FY17 Outlook

Office Depot Inc. (ODP) reported Wednesday a sharp decline in second-quarter profits due to the absence of a prior year benefit as well as weak sales. For fiscal 2017, the company continues to expect lower sales but higher adjusted operating income.

Gerry Smith, chief executive officer of Office Depot, said, “We remain on track to achieve our full year target. Longer term, we are maintaining our focus on executing initiatives to strengthen our existing business, expanding our last-mile advantage, while evaluating opportunities to transform the company for future growth.”

In the second quarter of 2017, the provider of office supplies, business products and services reported net income of $24 million or $0.05 per share, sharply lower than prior year’s $210 million or $0.38 per share.

On a continuing operations basis, net income was $21 million or $0.04 per share, down from $232 million or $0.41 per share a year ago.

The company said the prior year results benefited from $250 million of income related to the Staples termination fee received in the period.

Adjusted net income from continuing operations was $34 million or $0.06 per share, compared to $35 million or $0.06 per share in the prior year.

On average, 10 analysts polled by Thomson Reuters expected earnings of $0.08 per share for the quarter. Analysts’ estimates typically exclude special items.

Adjusted operating income declined to $68 million from $78 million last year.

Total reported sales for the second quarter dropped 9 percent to $2.36 billion from $2.58 billion last year. Analysts expected sales of $2.44 billion for the quarter.

Adjusted sales decline, excluding the impact from foreign currency translation and U.S. retail store closures, was 6%.

Retail Division sales declined due to the impact of planned store closures and a 6% decline in comparable store sales.

Business Solutions Division sales declined 6% in constant currency, primarily driven by continued competitive pressures.

For fiscal 2017, Office Depot said it continues to expect total company sales to be lower than in 2016, primarily due to the impact of planned store closures, prior year contract customer losses, continued challenging market conditions and returning to a 52-week fiscal year.

However, the company expects the rate of sales decline to improve in the second half of 2017.

The company continues to expect adjusted operating income of approximately $500 million in fiscal 2017, representing a comparable year-over-year increase of about…

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