Office Depot reverses loss in 1Q but expects weak 2nd-quarter, shares fall

Office Depot 1Q reverses loss, offers weak 2Q view

BOCA RATON, Fla. — Shares of Office Depot tumbled 18 percent in heavy trading Tuesday after the company reported first-quarter results that missed Wall Street expectations and forecast an operating loss in the second quarter.

Office Depot also said weak California sales and snowstorms in the Northeast and South that deterred shoppers hurt quarterly results.

Shares fell $1.59, or 17.8 percent, to $7.36 during afternoon trading. The stock has ranged between $2.31 and $9.19 during the past 52 weeks.

The company has been undergoing a restructuring as it deals with weak sales in the U.S., brought on by the recession. The effort helped Office Depot earn nearly $20 million, or 7 cents a share, in the three-month period ended March 27, reversing a year-ago loss of $54.7 million, or 20 cents a share. But profit still missed the average estimate of analysts surveyed by Thomson Reuters by a penny.

Total sales fell 5 percent to $3.07 billion, also shy of analysts’ $3.14 billion forecast. North American retail revenue fell 6 percent to $1.3 billion, mostly on the closing of 120 stores last year due to the restructuring.

Sales at stores open at least a year fell 1 percent in the quarter. That’s considered a key measure of retailer health because it measures growth at existing stores rather than newly opened ones.

Sales in the unit that caters to businesses in North America tumbled 9 percent to $831 million in the quarter. That unit was hurt by a double-digit decline in California — one of its largest places of business — and snowstorms in the Northeast and South, which hurt revenue by $5 million to $6 million.

International sales rose 2 percent to $894 million, though fell 5 percent in local currency.

For the second quarter, Office Depot forecast sales in stores open at least one year will be flat to down slightly. It also forecast an operating loss, though said it would narrow from last year’s adjusted loss of 22 cents per share.

Analysts expect a loss of 14 cents per share, on average.

“We are trying to be a little cautious in the second quarter because it is our weakest quarter,” said CEO Steve Odland in a call with analysts. “But we are more confident in our second half, as we get back into the fall season, back-to-school and so forth.”

The office-products sector as a whole has been pressured as both consumers and small businesses cut back on non-necessities but there have been signs that is easing. Office Depot’s larger rival Staples Inc. said last month that sales in North American retail stores open at least a year grew for the first time in 10 quarters.

OfficeMax reports fiscal first-quarter results on Thursday.

Standard & Poor’s analyst Michael Souers reiterated his “Sell” recommendation on Office Depot on weak small-business spending and said the company is likely losing market share to competitors.