Office Depot's profit buoyed by cost cuts
Office Depot Inc. said revenue fell 7% in the latest quarter as demand remained soft, but profit grew as it slashed costs by closing stores and as it booked a hefty tax benefit in the quarter.
Shares rose 6.5% to $3.25 in premarket trading.
Office Depot closed seven stores in the third quarter, ending the period with 1,506 stores in North America. It is working through its plan to close an additional 300 stores, on top of 400 stores from an earlier phase of closures, over the next three years.
In August, after its proposed tie-up with larger rival Staples Inc. failed regulatory muster, the company launched a quarterly dividend. The company also plans to trim $250 million in costs by 2018.
Office Depot and Staples thought bulking up could save costs, and that the firms could better manage the difficult retail environment as a combined company.
In the September period, same-store sales fell 2% in North America, compared with a 3% increase during the prior-year quarter.
Over all, Office Depot earned $44 million, or 8 cents a share, compared with $6 million, or a penny a share. Excluding items, earnings were 16 cents a share.
Revenue slipped to $2.84 billion from $3.05 billion a year ago. Excluding the impact of store closures and foreign currency translation, the company said sales fell 4%.
Analysts surveyed by Thomson Reuters had projected per-share earnings of 15 cents on revenue of $3.49 billion.
The company said lower occupancy costs and fewer selling, general and administrative expenses like payroll helped offset declining revenue. Meanwhile, it logged a $240 million income-tax benefit.
A federal judge blocked the $6.3 billion deal in May, though in 2013, the U.S. Federal Trade Commission approved Office Depot's takeover of the smaller OfficeMax. The FTC argued its tie-up with Staples would mean higher prices and fewer options for big companies that buy office supplies in bulk.
In August, Office Depot's chief executive Roland Smith said he would retire next year, and Staples Chief Ron Sarget stepped down from the role in June.
Total company sales in the fourth quarter -- and in 2017 -- are expected to be lower than 2015 and the company said it plans to close 65 more stores in the period.
Write to Joshua Jamerson at [email protected]