Office Depot’s sales decline but profits rise

Stock soars after ’16 results

Boca Raton-based office supply retailer Office Depot saw its stock rise by 16.53 percent Wednesday after the company reported higher profits despite lower sales.

Office Depot said it had sales of $11 billion for all of 2016, a decline of 6 percent. For the fourth quarter, sales were $2.7 billion, a decrease of 2 percent.

But yearly earnings jumped as management reported net income from continuing operations of $679 million, or $1.24 a share compared with $92 million, or 16 cents a share in 2015. For the fourth quarter, net income was $55 million compared with $15 million in the same quarter a year ago.

The company beat consensus profit expectations for the fourth quarter.

The shares closed up 69 cents on the Nasdaq to $4.83.

“Office Depot delivered another year of improved profitability in 2016 … despite experiencing substantial business disruption related to the Staples acquisition attempt,” said Gerry Smith, newly appointed CEO, who began his job this week.

Smith, who previously was a top executive at the North Carolina-based technology company Lenovo, told analysts on a conference call Wednesday that he was attracted to leading Office Depot because of its multi-faceted approach to retail: traditional stores, direct sales to businesses and online. That is a “a key differentiator against pure online competitors and one that can be further enhanced in the future,” he said.

Staples and Office Depot called off their proposed $6.3 billion merger in May after it was challenged in court by federal regulators for anti-competitiveness.

In February, Office Depot laid off an undisclosed number of employees at its headquarters. The layoff didn’t warrant a notification to the state, the company said at the time. Office Depot must retain 1,950 headquarters jobs, according to its economic incentives contract with the county and 2,010 jobs, according to its contract with Boca Raton. The headcount is expected to be reported by the end of March.

In its North American retail division, Office Depot said sales were $1.4 billion in the fourth quarter, with a same-store sales decline of 4 percent due to lower floor traffic. The retailer closed 123 stores in 2016, and expects to close 75 in 2017, part of a plan to streamline retail operations after its completed merger with OfficeMax in 2013 and to optimize retail space.

The retailer has a total of 1,441 stores in the U.S., with 145 stores in Florida, according to a regulatory filing.

Office Depot said it expects 2017 sales to be lower than 2016 due to store closures, contract customer losses related to the planned merger with Staples, and “challenging market conditions.”