April 27, 2010 / 12:43 PM / 8 years ago

UPDATE 4-Office Depot disappoints; sees 2nd-qtr loss

* Sees operating loss in Q2

* Says Q2 same-store sales may be flat to down slightly

* Q1 EPS $0.07 vs Street view $0.08

* Sales down 5 pct at $3.07 billion, misses Street view

* Shares fall 18 pct; weigh on OfficeMax, Staples (Adds analyst comments, updates stock move)

By Dhanya Skariachan

NEW YORK, April 27 (Reuters) - Office Depot Inc ODP.N reported weaker-than-expected quarterly results on Tuesday and forecast a second-quarter operating loss, sending shares in the No. 2 U.S. office supplies seller down 18 percent.

Store closures and higher advertising expenses hurt Office Depot’s North American retail division. A double-digit sales decline in California, one of its larger markets, hurt the unit that caters to business customers.

The company also blamed winter storms in the Northeast and Southeast, where heavy snow forced it to close some distribution facilities and miss deliveries to business clients.

Office Depot warned that same-store sales in the second quarter, traditionally its weakest sales period, may be flat to slightly down. It also expects its problems in California to continue for a while.

“With the budget deficit and government-mandated three-day-per-month furloughs for state employees in place, it looks like our business in California could be affected for an extended period,” Chief Executive Steve Odland said.

Office Depot, which recently replaced its North American retail chief, said sales at its U.S. and Canadian stores that have been open for more than a year fell 1 percent.

“If you are looking for signs that the economy is recovering, you wouldn’t find them in Office Depot,” said BB&T Capital Markets analyst Anthony Chukumba, adding most of the reasons for the weak performance were company-specific.

The company reported a first-quarter profit of $20 million, or 7 cents a share, compared with a loss of $54.74 million, or 20 cents a share, a year earlier.

Analysts on average were expecting a profit of 8 cents a share, according to Thomson Reuters I/B/E/S.

Sales at the company fell about 5 percent to $3.07 billion and missed the consensus analyst estimate of $3.14 billion.

The results and outlook dragged its stock price down as much as 18 percent, making it one of the top percentage losers on the New York Stock Exchange. They also weighed on the shares of smaller rival OfficeMax Inc OMX.N and industry leader Staples Inc SPLS.O, which fell 5 percent, and 2.8 percent, respectively.

Analysts noted that Office Depot was ceding share to its better-positioned rivals after all three chains suffered during the downturn.

“There is no question right now that OfficeMax is doing a better job of executing their business than Office Depot,” Chukumba said, adding he would recommend that investors choose the smaller rival if they are looking for a secondary player in the sector after Staples.

“I certainly am not reading into these Office Depot results for OfficeMax’s earnings...or Staples,” Chukumba said.

Oppenheimer’s Brian Nagel said the “indications of still soft top line trends at Office Depot could disappoint the growing group of investors seeking a significant turnaround at the chain.” (Reporting by Dhanya Skariachan; Editing by Derek Caney, Dave Zimmerman, Robert MacMillan and Gunna Dickson)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below