Office Depot (ODP) Reports 4Q Earnings, Benefits from Merger with OfficeMax

Shares of Office Depot Inc.(ODP) were up +0.17 or +1.80 percent to $9.61 in Tuesday's premarket after the company reported its loss had narrowed in the fourth quarter and withdrew its guidance for 2015 due to its tentative merger with Staples Inc. (SPLS). Office Depot stock closed at $9.44, down -0.05 or -0.53 percent in Monday's regular trading session.

Founded in 1986, Boca Raton, Florida based Office Depot Inc. is an international office supply retailer with over 2,200 retail stores in 59 countries.
In addition to traditional retail outlets, the company also operates a business to business operation and e-commerce websites. Office Depot merged with OfficeMax in an all-stock deal which finalized in November of 2013. The combined company has annual sales of about $17 billion and employs more than 66,000 people worldwide.

On February 4th, Office Depot entered into an agreement to merge in a deal valued at $6.3 billion. The two companies were blocked from merging by the Federal Trade Commission in 1997 due to anti-trust issues. The merger, which is expected to close by the end of this year, will leave just one major office supply chain after Office Depot's takeover of OfficeMax.

Office Depot reported a loss of -$84 million, or -$0.15 per share in the company's fiscal fourth quarter versus a loss of -$144 million, or $0.34 per share in the same period one year ago. Revenue for the quarter was $3.83 billion, an increase of +10 percent over last year's fourth quarter. With the exclusion of merger and other expenses, the company reported a profit of +$0.07 per share in the quarter. The analyst consensus was for the company to earn +$0.04 per share on revenue of $3.9 billion.

For the full 2014 fiscal year, Office Depot reported an operating loss of -$275 million versus a loss of -$205 million in 2013, with a net loss attributable to common stockholders of -$354 million, or -$0.66 per share, which compares to a net loss of -$93 million, or -$0.29 per share in 2013.

Roland Smith, Office Depot's Chairman and Chief Executive Officer stated in the company's press release that, "We were pleased to deliver strong fourth quarter results, and full year 2014 adjusted operating income that was almost three-fold higher than the prior year pro forma. Our teams executed extremely well on all of our 2014 critical priorities, and we exited 2014 with an annualized run rate of more than $500 million in merger integration synergies. Our operating priorities for 2015 primarily focus on driving continued synergies and efficiencies and improving the customer experience."

Brick and mortar stores such as Office Depot have been under considerable pressure in the last few years, due in large part from online retailers such as (AMZN) and growing competition from stores such as Wal-Mart (WMT) and Target (TGT). Office Depot's same store sales have not increased since 2006 as a result.

As a result of its 2013 merger with OfficeMax, the company reported a +9.7 percent increase in sales in its North American retail division to +$1.54 billion. Nevertheless, on a pro forma basis sales in the segment fell seven percent due to store closures. Office Depot is still in the process of closing hundreds of is retail locations which were duplicated by OfficeMax causing a two percent decline in same store sales.

Office Depot's North American Business Solutions division reported sales of $1.46 billion, an increase of +24.5 percent over the same quarter last year, but due to lower sales in Canada and currency translation, pro forma sales dropped one percent overall. The company warned that sales would be lower in its current fiscal year as it awaits approval from U.S. regulators for its merger with Staples. Due to the merger, the company withdrew its guidance for the 2015 fiscal year.

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Published on Feb 24, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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