Office Depot shares jump on strong sales results
BOCA RATON — Shares of retailer Office Depot jumped sharply last week after the Fortune 500 company reported better-than-expected sales and earnings.
Boca Raton-based Office Depot (NASDAQ: ODP) said second-quarter sales totaled $2.63 billion, an 11 percent increase from $2.36 billion in the second quarter of 2017. The long-struggling company has been working to transform itself from a purveyor of pens and paper to a provider of tech support.
While net income and earnings per share were down slightly, both beat analyst estimates. Net income was $19 million, down from $21 million a year earlier, while earnings per share were 3 cents, down from 4 cents a year ago.
Chief Executive Gerry Smith pointed to “positive momentum” created by the company’s shift from traditional retail toward a services-based business.
Investors were impressed. Shares jumped 13 percent on Tuesday, the day of the earnings announcement, and an additional 6 percent Wednesday.
In the biggest move of its makeover, Office Depot in November paid $1 billion for CompuCom, a provider of tech support to large companies. Smith envisions customers developing deeper relationships with Office Depot by subscribing to CompuCom offerings such as cybersecurity services.
Meanwhile, Smith said Office Depot will launch its first Spanish-language marketing campaign. And, he said the retailer has expanded its back-to-school offerings beyond elementary schoolers to include students in middle school, high school and college.
Office Depot, which employs 2,000 workers at its home office, has received millions in state and local incentives to maintain its headquarters in Palm Beach County.
In recent years, Office Depot has been plagued by shrinking sales. Revenue fell from $12.7 billion in 2014 to $10.2 billion in 2017.
But Palm Beach County has been on a winning streak in terms of keeping the trophy headquarters here. After Office Depot bought OfficeMax in 2013, Office Depot considered moving to OfficeMax’s home in Naperville, Illinois.
Then, when Office Depot announced it would be sold to Staples, its larger rival said the combined companies’ headquarters would be in Framingham, Massachusetts. However, federal antitrust regulators nixed Office Depot’s proposed sale to Staples. The blocked deal was a replay of the 1990s, when Staples said it would buy Office Depot, only to be stopped by regulators.
Smith took the helm of Office Depot in February 2017 from Roland Smith, and the new CEO said he faces no choice but to pursue a dramatic change in the company’s business model.