Office Depot will buy back $110M in stock

Boca Raton-based Office Depot, which has been on a journey to reinvent itself as a business services company, announced Tuesday it will buy back $100 million of its stock beginning Jan. 1 and reduce debt — actions aimed at improving the company’s financial outlook and boosting its stock.

Office Depot also said in its news release that it would repay $200 million of a $500 million term loan due in 2022.

Could it be that Office Depot — which has been on a multi-year roller coaster of changing leadership, a failed merger attempt with rival Staples, sliding sales, store closings and other restructuring — is really turning around?

“Our continued business momentum and strong cash flow generation has enabled us to negotiate a significant reduction in annual interest expense,” said Gerry Smith, CEO of Office Depot, which employs about 2,000 at its Boca Raton headquarters and has about 1,400 stores nationwide.

Moody’s Investors Service thinks so. On Monday, the bond credit rating business upgraded Office Depot from its “probability of default rating” to “senior secured” rating, or an outlook of “stable.”

“The upgrade reflects the company’s prudent financial policy as it continues its transformation to a more business services oriented company and operating results that have exceeded Moody’s projections,” said Moody’s analyst Peggy Holloway, in a news release by the ratings company.

Moody’s noted that the improving sales trend “in the Business Solutions Division has more than offset continued declines in the retail segment and the pace of decline in the retail segment is decelerating.”

While expenses are higher to invest in its transformation in its new strategy, “Office Depot has the financial flexibility to support its transformation,” Moody’s said.

Other South Florida public companies that have repurchased stock this year include Citrix Systems, Office Depot, AutoNation, Carnival Corp., Royal Carib-

bean International and Norwegian Cruise Lines.

Companies that repurchase shares do so because they think their stock is undervalued, or they want to maximize shareholder value. Some experts say 2018’s stock repurchases have been driven by the Trump administration’s massive corporate tax cut to 21 percent from 35 percent, signed into law late last year.

In early November, Office Depot’s stock climbed 24 percent in Nasdaq trading to $3.24 a share following the company’s thirdquarter sales increase of 10 percent and 1-cent beat on earnings-per-share estimates.

Smith said at the time that his transformation strategy was working, citing “sustainable earnings.” Office Depot’s service revenues got a boost from South Carolina-based IT services company, CompuCom, which it acquired in 2017 for $1 billion. Providing businesses technology and management solutions through CompuCom is at the core of Office Depot’s transformation.

Office Depot’s stock has ranged from a low of $2 to a high of $3.66 a share over 52 weeks in Nasdaq trading. On Tuesday, Office Depot’s stock closed at $2.91, down 2 cents or 0.68 percent.

CARLINE JEAN/SUN SENTINEL Boca Raton-based Office Depot is buying back stock and trimming its debt.