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OFFICE DEPOT FIRST QUARTER REVENUE UP 3%; EPS $0.37
April 21, 2005 -- Office Depot, Inc. (NYSE: ODP), a leading global provider of office products and services, today reported sales of $3.7 billion for its fiscal first quarter ended March 26, 2005, up 3% over fiscal first quarter 2004[1]. North American Retail Division comparable sales increased 1% for the quarter. Operating profit for the first quarter was $165 million, representing a 5% decrease compared to the same period in 2004. Net earnings and net earnings per diluted share for the first quarter remained unchanged over the same period last year at $115 million and $0.37, respectively. Return on invested capital for the trailing four quarters was 10.6%, unchanged from the same periods in the previous year. For the first quarter, gross profit, as a percentage of sales, was 31.1% versus 31.5% in the same period last year. North American Retail Division sales and gross margin rate increases were offset by a North American Business Services Division gross margin rate decrease and International Division sales and gross margin rate decreases. Total operating expenses, as a percentage of sales, remained flat for the first quarter, as reduced general and administrative expenses were offset by increased store and warehouse operating and selling expenses. “We delivered mixed results this quarter,” said Steve Odland, Chairman and Chief Executive Officer. “North American Retail recorded its fifth consecutive quarter of positive comparable sales while improving its division operating profit margin by over 70 basis points. North American Business Services division operating profit grew at a faster rate than sales, and corporate general and administrative costs declined. On the other hand, International’s results fell short of our expectations. Despite very difficult business conditions in Europe, we clearly have an opportunity to improve International’s performance.” Odland was appointed Chairman and CEO on March 11, 2005, near the end of the Company’s fiscal first quarter. DIVISION RESULTS North American Retail First quarter sales in the North American Retail Division increased 6% compared to the same period last year. Comparable store sales in the 894 stores in the U.S. and Canada that have been open for more than one year increased 1% for the first quarter. Gross margin, as a percentage of sales, increased during the first quarter to 27.0% compared to 26.7% in the same period last year. Broad based product category gross margin percentage improvements were offset by an increased sales mix of lower margin technology products. Cost management efforts produced a 40 basis point decline in store and warehouse operating expenses. Division operating profit increased 17% in the first quarter compared to the same period in 2004. During the first quarter, the Company opened 29 new stores, while closing three and relocating one office supply store. At the end of the first quarter, Office Depot operated a total of 995 office products superstores throughout the U.S. and Canada. North American Business Services North American Business Services sales increased by 2% in the first quarter compared to the same period last year. Increased Contract, Office Depot Direct and Tech Depot sales contributed to the overall revenue growth. Gross margin, as a percentage of sales, decreased during the first quarter to 31.7% versus 32.4% in the same period last year. The absorption of higher costs in key supplies categories, promotional activity and additional lower margin technology sales contributed to the gross margin decline. This margin pressure was more than offset by an 84 basis point improvement in store and warehouse expenses for the first quarter. Division operating profit increased 4% in the first quarter compared to the same period in 2004. International International first quarter sales decreased 2% in U.S. dollars (a decline of 6% in local currencies) compared to the same period in 2004. Comparable International sales declined 7% for the quarter. The favorable change in exchange rates from the corresponding prior year period increased sales reported in U.S. dollars by $40 million for the quarter. Comparable sales declined in all major geographic markets. Gross margin, as a percentage of sales, decreased during the first quarter to 37.7% versus 38.6% in the same period last year. Increased promotional activity and pricing pressure in key product categories contributed to the decline. First quarter selling and warehouse expenses, as a percent of sales, increased 282 basis points compared to the prior year, primarily because of deleverage associated with lower local currency sales volumes and increased expenses related to warehouse closures and relocations in Europe. Division operating profit declined 28% (a decline of 31% in local currencies) in the first quarter compared to the same periods in 2004. International division operating profit, when translated into U.S. dollars, benefited from foreign exchange rates by $4 million during the quarter. Conference Call Information Office Depot will hold a conference call
for investors and analysts at 9:00 a.m. (Eastern Daylight
Time) on today’s date. The conference call will be available
to all investors via Webcast at http://investor.officedepot.com. Interested
parties may contact Investor Relations at 561-438-7893 for
further information. About Office Depot Europe In Europe, Office Depot sells office products and services under the Office Depot, Viking Direct and Guilbert brand names. As one of the Industry’s leading direct mail marketers worldwide, Viking Direct currently operates in 12 countries, including: Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Switzerland and the United Kingdom. In addition, the Company has operations under the Guilbert and Office Depot brand names through its Business Services Division in twelve countries: Belgium, France, Germany, Hungary, Ireland, Italy, Luxemburg, The Netherlands, Portugal, Spain, Switzerland and the United Kingdom. The division targets medium to large-sized corporate and international accounts through a professional sales force providing tailored office supply solutions. Furthermore the Company has 44 wholly owned retail stores under the Office Depot brand name in France, 5 stores in Spain and 4 stores in Hungary as well as license agreements in Poland. Besides, Office Depot has entered into Strategic Partnerships with four independent office supplies companies in each of the Scandinavian countries. These partnerships will significantly strengthen Office Depot’s European and International service capabilities to both new and existing customers.
OFFICE DEPOT, INC.CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS(In thousands, except per share amounts) (Unaudited)
OFFICE DEPOT, INC. DIVISION INFORMATION (In millions) (Unaudited)
North American Retail
North American Business Services
International
OFFICE DEPOT, INC.OTHER SELECTED FINANCIAL AND OPERATING DATA(In thousands, except per share amounts, return and operating data) (Unaudited)
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