Tags: Office | Supply | Stores | Service | office | depot | staples

Office-Supply Stores Focus on Service

Thursday, 28 Apr 2011 01:21 PM

There’s only so much you can blame on the recession. Take Office Depot (ODP), where disappointing sales growth has caused executives to reconsider their approach.

The company reported total sales for the first quarter of 2011 came to $3 billion, a decrease of 3 percent compared to the first quarter of 2010. The company saw a net loss of $15 million in the first quarter of 2011, compared to net earnings of $20 million in the first quarter of 2010.

Consumers were buying fewer pens, Post-It notes, printers, office chairs, and other supplies, but the blame lies squarely on poor customer service, says Kevin Peters, head of the retail division for the Boca Raton, Fla. company. "Our model was broken," he told the Sun-Sentinel newspaper.

Full-year 2010 sales came to $11.6 billion, a 4 percent decrease from the prior year, while the net loss for the full year 2010 was $2 million, compared to a loss of $627 million in 2009.

The stock is currently trading on the low end of its 52-week average, which makes it a good stock to watch as the economy looks for a way to resume growth.

"Our first-quarter operating results were lower than the prior year due to the impact of lower sales," Neil Austrian, Office Depot's interim chairman and chief executive officer, said in a company earnings statement. "However, we are encouraged by the progress we're making throughout the enterprise to improve the future operating performance of the company."

For instance, Office Depot has completed its acquisition of Svanströms Gruppen, a Swedish office-supply company, in February of this year, a move that will lead to future growth outside of the United States.

Furthermore, the company has been fixing tax issues and streamlining operations to better position itself going forward, including closing up some of its stores in Canada.

Competitor Staples (SPLS), on the other hand, had a profitable 2010.
Sales for the fourth quarter of 2010 increased slightly to $6.4 billion compared to the fourth quarter of 2009, while net income during the period rose 17 percent year-over-year to $275 million.

For the full year, sales rose 1 percent to $24.5 billion compared to the full year 2009, while net income increased 19 percent year-over-year to $882 million.

"We got back to growing the top-line, achieved solid operating margin expansion and earnings growth, and generated over a billion dollars in free cash flow,” Ron Sargent, Staples’ chairman and chief executive officer, said in an earnings statement.

“While the fourth quarter was challenging primarily due to the impact of winter storms, sales have recovered in the first quarter of 2011."

Goldman Sachs has Staples at neutral with a price target of $23.

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There s only so much you can blame on the recession. Take Office Depot (ODP), where disappointing sales growth has caused executives to reconsider their approach. The company reported total sales for the first quarter of 2011 came to $3 billion, a decrease of 3 percent...
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2011-21-28
Thursday, 28 Apr 2011 01:21 PM
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