Tags: Office | Depot | Profit | earnings

Office Depot's Profit Tops Wall Street Estimates

Tuesday, 28 February 2012 09:45 AM

Office Depot Inc., the second-largest U.S. office supply chain, reported a higher-than-expected quarterly profit, boosted by lower expenses and fewer discounts during the holiday season.

The news, which pushed Office Depot shares up more than 9 percent on Tuesday, came less than a week after smaller rival OfficeMax Inc also beat Wall Street expectations for the fourth quarter. Industry leader Staples Inc is due to report its results on Wednesday.

"This may be a signal, along with OfficeMax's better-than-expected results last week, that the office supply retailing market has bottomed," said BB&T Capital Markets analyst Anthony Chukumba. He said he was pleased with the slight improvement in margins and sales trends across the industry.

The results also follow a series of positive U.S. economic data, making Chukumba and others more optimistic about the sector for the rest of the year.

"If you sort of read the macroeconomic tea leaves," Chukumba said, "we have certainly seen improvements in terms of initial jobless claims, we have seen the unemployment rate come down, we are seeing seen increased confidence in access to credit among small business customers, and I think that all bodes very well for the office supply retailers in 2012."

Many investors look at office supply retailers as a barometer of economic health because demand for their products is closely tied to white-collar employment rates.

Tuesday's news bodes well for Staples, Chukumba said. He has a "buy" rating on Staples and OfficeMax shares and a "hold" on Office Depot.

Sales at all three chains have suffered as small businesses and regular shoppers spent less, forcing the companies to keep a tight lid on costs to protect profits.

Office Depot's net income was $12 million, or 4 cents a share in the fourth quarter, compared with a year-earlier loss of $109 million, or 39 cents a share.

Excluding charges and tax benefits, the profit was 3 cents a share. Analysts on average were expecting the company to break even, according to Thomson Reuters I/B/E/S.

Sales were essentially flat at about $3 billion, in line with analysts' expectations.

Sales at North American stores open more than a year fell 5 percent as fewer discounts discouraged some shoppers. Barclays analyst Alan Rifkin was expecting only a 2 percent decline.

Shares of Office Depot were up 9.3 percent at $3.30 in trading before the market opened.

© 2019 Thomson/Reuters. All rights reserved.

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Tuesday, 28 February 2012 09:45 AM
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