Office Depot soldiers on amid weak economy

BOCA RATON, Fla. — Second-quarter results from Office Depot reveal ongoing challenges in an economy still struggling to regain its footing.

A lack of spending by customers in Office Depot’s three business segments caused the company to report a loss for the second quarter ended June 25 of $29 million, or 11 cents a share, compared with a loss of $25 million or nine cents a share the prior year on sales of $2.7 that were essentially flat. The picture improves slightly to a loss of $17 million, or six cents a share, if charges totaling $20 million related to restructuring activities are excluded. On an operating basis, the company said it achieved an $11 million operating profit compared with the prior year’s $23 million operating loss.

“Our second quarter 2011 operating results improved versus the prior year due to the successful execution of our key initiatives throughout the company,” said Neil Austrian, Office Depot’s chairman and CEO. “We are pleased with the progress across the enterprise and our associates will continue to direct their efforts toward achieving our goals.”

Looking at the company’s three divisions, sales at North American retail stores declined 2% to roughly $1.1 billion, and same-store sales declined 1% as the company noted a drop in customer traffic late in the quarter. Operating profits for the division declined to $3 million compared to $9 million the prior year and were negatively affected by a $12 million charge related to the closure of 10 stores in Canada.

Taking out the charges, Office Depot said it would have achieved a $15 million operating profit that reflected gross margin improvements, lower property costs and reduced advertising expenses. The company ended the quarter with 1,131 stores after it closed 14 stores, opened four and relocated four others.

The company’s second largest division, North American Business Solutions, also posted a drop in sales. A decline in average order value and transaction counts caused sales to drop 2% to $803 million, however operating profit increased to $45 million compared with $14 million.

Internationally, Office Depot saw sales increase 6% to $827 million due to a weak dollar while on a constant currency basis sales declined 5%. Operating profits dropped to $13 million compared to $19 million. International results included a $6 million charge without which the operating performance would have been comparable to the prior year.