Sun Sentinel Palm Beach Edition
Office Depot stock soars
Boca Raton-based Office Depot delivered an increase on revenues and beat earnings estimates in its third quarter results, which were released Wednesday.
And Wall Street reacted: The company’s stock closed Wednesday at $3.41 a share, up 66 cents or 24 percent in Nasdaq trading.
Office Depot reported sales of $2.89 billion, up from the consensus estimate of $2.83 billion, and earnings per share of 13 cents, 1 cent better than analysts’ estimates of 12 cents.
Sales increased 10 percent in the quarter, up from $2.62 billion in the third quarter of 2017, the company said.
CEO Gerry Smith said the quarter showed progress on Office Depot’s strategy to transform from an office supply retailer to a business services company.
“We’ve strengthened our core this year. It’s sustainable earnings, which are important,” said Smith during a conference call with Wall Street analysts on Wednesday. “I’ve always said we have to get the sales engine working first.”
Service revenues grew 123.7 percent, driven primarily by revenues from South Carolina-based IT services company, CompuCom, which it acquired in 2017 for $1 billion.
Still, CompuCom sales were down 4 percent compared with the quarter a year ago, which was before CompuCom was acquired. Sales were affected by one of CompuCom’s largest customers reorganizing its business, Office Depot said.
Excluding CompuCom and accounting impacts, revenue grew 17 percent in the third quarter, the company said.
Retail sales, which have been struggling, continued to decline. Sales were $1.3 billion in the quarter, down 6 percent compared with the same quarter a year ago. Office Depot attributed the decline to planned store closures and an $8 million impact from adoption of a new revenue recognition standard.
Sales were down 5 percent not including the accounting change, the company said. Office Depot said it has closed two stores in the quarter and has closed six year-to-date. The retailer has 1,372 stores in the United States.
Smith said Office Depot’s contract sales to government and business were up 6 percent, which was “the best quarter in over a decade.”
Office Depot’s business solutions division, which includes e-commerce, took a big hit during the company’s battle to acquire rival Staples. That pursuit ended in May 2016.
“A lot of people didn’t believe us that we could grow the business solutions division. We’ve done that,” Smith said.
Office Depot employs about 2,000 people at its headquarters in Boca Raton, and Florida is one of the company’s biggest markets.