BOCA RATON, Fla.--(BUSINESS WIRE)--Apr. 4, 2019--
Office Depot, Inc. (“Office Depot,” or the “Company”) (NASDAQ:ODP), a
leading integrated business-to-business (“B2B”) distribution platform
of business services and supplies, products and technology solutions,
today announced preliminary estimated results for the first quarter
ended March 31, 2019. The Company will report actual financial results
for the first quarter 2019 and provide updated full-year 2019 guidance
on its upcoming earnings announcement and conference call scheduled for
May 8, 2019.
For the first quarter of 2019, the Company expects to report revenue of
approximately $2.76 billion and adjusted operating income1 of
approximately $65 million. The primary driver of the anticipated first
quarter 2019 results was lower than expected operating performance at
the Company’s CompuCom division.
The Company’s CompuCom division is expecting to report an operating loss
of approximately $15 million in the first quarter of 2019, primarily
driven by lower than expected revenue from existing customer projects
compounded by less than commensurate reductions in associated expenses.
Profitability was further pressured by ongoing expenditures to develop
and market additional service offerings. The Company has recently
undertaken several actions to improve its future operating performance.
These include streamlining its operational structure to improve service
velocity and efficiency, reorganizing its customer-facing organization
to better align with customer needs, and realigning the sales team to
more effectively identify new opportunities to increase penetration of
existing customers and accelerate cross-selling opportunities. The
Company expects that these and other actions will place CompuCom on a
path to get back on track with its long-term expectations, delivering
improved growth and profitability in the future.
The Company’s Business Solutions Division (“BSD”) is expecting to report
operating income of approximately $46 million in the first quarter of
2019. This performance was impacted by paper and paper related costs
increases that could not be completely passed through to customers due
to the timing of contractual limitations. Paper costs have increased
over 20% during the past 12 months and the Company is pursuing several
initiatives to mitigate the impact of such cost increases going forward.
In addition, lower eCommerce related sales coupled with investments in
demand generation and eCommerce capabilities, including those associated
with the collaboration agreement recently announced, adversely impacted
results in the quarter.
The Company’s Retail division is expecting to report operating income of
approximately $66 million in the first quarter of 2019. The Company’s
success in growing its service offerings is mitigating some of the
broader industry trends associated with more traditional office
products. The Company is continuing to evaluate and implement additional
initiatives in its retail footprint, improving conversion and product
assortment mix, as well as exploring store-within-a-store and co-working
opportunities, which to date have shown early signs of success.
(1) Adjusted Operating Income is a non-GAAP measure and excludes charges
or credits not indicative of core operations and tax effects of these
items, which may include but not be limited to merger integration,
restructuring, acquisition, asset impairments and executive transition
costs. The Company is unable to provide preliminary results for the
comparable GAAP measure of operating income for the first quarter
without unreasonable efforts because the exact amount of these charges
or credits are not currently determinable until the closing procedures
for the quarter are complete, but these charges or credits may be
significant. Accordingly, the Company is unable to provide
reconciliations from GAAP to non-GAAP for these financial measures
without unreasonable effort, although it is important to note that these
charges or credits could be material to Office Depot’s first quarter
results in accordance with GAAP. Management believes that the
presentation of the non-GAAP measure, Adjusted Operating Income,
enhances the ability of investors to analyze trends in its business and
provides a means to compare periods that may be affected by various
items that might obscure trends or developments in the business.
“Despite the current challenges we are facing, we are confident that our
transformation is on track to drive long-term value for our
stakeholders,” said Gerry Smith, chief executive officer of Office
Depot. “CompuCom’s operating performance was clearly disappointing and
the actions we are taking to improve its operations and sales
performance are expected to yield improving results in 2019. CompuCom is
an important strategic asset for our future with approximately 6,000
certified technicians providing unique services capabilities,
cross-selling opportunities, and partnering opportunities with some of
the most highly regarded companies in the world.” Smith continued, “I am
pleased with the actions we are taking across the business to position
us for long term success. To ensure our success and to address potential
headwinds, we are pursuing a company-wide profit improvement plan to
further improve cost efficiencies throughout the entire organization.
These initiatives include organizational improvements and leveraging the
use of technology and automation in our facilities and offices.”
The Company will provide more details on its business performance and
profit improvement initiatives, as well as updated guidance for 2019, in
its upcoming earnings announcement and conference call scheduled for May
8, 2019. To listen to the conference call webcast, please visit the
Office Depot Investor Relations website at investor.officedepot.com.
A replay of the webcast and a copy of the presentation will also be
available on the website.
About Office Depot, Inc.
Office Depot, Inc. (NASDAQ:ODP) is a leading provider of business
services and supplies, products and technology solutions through its
fully integrated B2B distribution platform of approximately 1,350
stores, online presence, and dedicated sales professionals and
technicians to small, medium and enterprise businesses. Through its
banner brands Office Depot®, OfficeMax®, CompuCom® and Grand&Toy®, as
well as others, the Company offers its customers the tools and resources
they need to focus on their passion of starting, growing and running
their business. For more information, visit news.officedepot.com
and follow @officedepot on Facebook, Twitter and Instagram.
Office Depot is a trademark of The Office Club, Inc. OfficeMax is a
trademark of OMX, Inc. CompuCom is a trademark of CompuCom Systems, Inc.Grand&Toy is a trademark of Grand & Toy, LLC in Canada. ©2019 Office
Depot, Inc. All rights reserved. Any other product or company names
mentioned herein are the trademarks of their respective owners.
FORWARD LOOKING STATEMENTS
This communication may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements or disclosures may discuss goals, intentions and expectations
as to future trends, plans, events, results of operations, cash flow or
financial condition, or state other information relating to, among other
things, Office Depot, based on current beliefs and assumptions made by,
and information currently available to, management. Forward-looking
statements generally will be accompanied by words such as “anticipate,”
“believe,” “plan,” “could,” “estimate,” “expect,” “forecast,”
“guidance,” “outlook,” “intend,” “may,” “possible,” “potential,”
“predict,” “project,” “propose” or other similar words, phrases or
expressions, or other variations of such words. These forward-looking
statements are subject to various risks and uncertainties, many of which
are outside of Office Depot’s control. There can be no assurances that
Office Depot will realize these expectations or that these beliefs will
prove correct, and therefore investors and stockholders should not place
undue reliance on such statements.
Factors that could cause actual results to differ materially from those
in the forward-looking statements include, among other things, highly
competitive office products market and failure to differentiate Office
Depot from other office supply resellers or respond to decline in
general office supplies sales or to shifting consumer demands;
competitive pressures on Office Depot’s sales and pricing; the risk that
Office Depot may not be able to realize the anticipated benefits of
acquisitions due to unforeseen liabilities, future capital expenditures,
expenses, indebtedness and the unanticipated loss of key customers or
the inability to achieve expected revenues, synergies, cost savings or
financial performance; the risk that Office Depot is unable to transform
the business into a service-driven company or that such a strategy will
result in the benefits anticipated; failure to execute effective
advertising efforts; the risk that Office Depot is unable to
successfully maintain a relevant omni-channel experience for its
customers; failure to attract and retain key personnel, including
qualified employees in stores, service centers, distribution centers,
field and corporate offices and executive management; disruptions in
Office Depot computer systems; breach of Office Depot information
technology systems affecting reputation, business partner and customer
relationships and operations and resulting in high costs; loss of
business with government entities, purchasing consortiums, and sole- or
limited- source distribution arrangements; product safety and quality
concerns of manufacturers’ branded products and services and Office
Depot private branded products; increases in fuel and other commodity
prices; increases in the cost of material, energy and other production
costs, or unexpected costs that cannot be recouped in product pricing;
unanticipated downturns in business relationships with customers or
terms with the suppliers, third-party vendors and business partners;
disruption of global sourcing activities, evolving foreign trade policy
(including new tariffs on certain foreign made goods); a downgrade in
Office Depot credit ratings or a general disruption in the credit
markets; covenants in the credit facility and term loan; incurrence of
significant impairment charges; fluctuation in quarterly operating
results due to seasonality of Office Depot business; changes in tax laws
in jurisdictions where Office Depot operates; unexpected claims,
charges, litigation, dispute resolutions or settlement expenses; the
inability to realize expected benefits from the disposition of the
international operations; fluctuations in currency exchange rates;
changes in the regulatory environment, legal compliance risks and
violations of the U.S. Foreign Corrupt Practices Act; increases in wage
and benefit costs and changes in labor regulations; catastrophic events,
including the impact of weather events on Office Depot’s business;
failure to effectively manage Office Depot real estate portfolio;
volatility in Office Depot common stock price, and unanticipated changes
in the markets for Office Depot’s business segments. The foregoing list
of factors is not exhaustive. Investors and shareholders should
carefully consider the foregoing factors and the other risks and
uncertainties described in Office Depot’s Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed
with the U.S. Securities and Exchange Commission. Office Depot does not
assume any obligation to update or revise any forward-looking statements.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190404005342/en/
Source: Office Depot, Inc.
Tim Perrott
Investor Relations
561-438-4629
Tim.Perrott@officedepot.com
Danny
Jovic
Media Relations
561-438-1594
Danny.Jovic@officedepot.com
