Office Depot Exiting International Operations to Focus on North American Business
Office Depot shares were 15.1 percent higher Wednesday at $3.51 after the chain said it plans to exit international operations altogether to focus on the North American market, after its September announcement it plans to sell its European business to…
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Aurelius Group. On the company’s Q3 earnings webcast Wednesday, Office Depot Chief Financial Officer Steve Hare said it made the decision to sell “substantially all” international operations and wants to offload businesses in Australia, New Zealand, South Korea and China that together generate about $600 million annually. Office Depot plans to retain its sourcing and trading operations in Asia, Hare said. The North American business is the core of the retailer’s three-year strategic plan to achieve profitable growth, he said. Part of that plan is to “reinvent” its retail business, whose Q3 revenue fell to $1.5 billion, down 8 percent year over year, due to lower sales in ink, toner and computers, lower average order value and a “very competitive” 2016 back-to-school sales season, Hare said. Comparable store sales decreased 2 percent. Office Depot closed seven stores in the quarter, bringing the number of North American stores to 1,506, and it plans to shutter 65 stores in Q4 and 300 over three years, he said. In Q3, Office Depot converted 15 stores to a smaller 15,000-square-foot footprint, vs. previous layouts of 20,000-30,000 square feet, said CEO Roland Smith. Under the new format, the company eliminated a third of “slow-moving” and lower margin SKUs, while adding higher quality, higher margin “curated” products, Smith said. It redesigned stores to make them easier to navigate and dedicated “considerable" space to copy, print and technical services. The company's Q3 sales fell 7 percent to $2.8 billion, and earnings rose to $44 million from $6 million. Smith said Office Depot is “recovering quickly from the disruption caused by the protracted Staples acquisition attempt,” he said. Office Depot and Staples announced the termination of the merger agreement in May after a U.S. district judge in the District of Columbia granted the Federal Trade Commission's motion for an injunction blocking the deal. Office Depot forecast lower revenue in Q4 due to the impact of store closures, contract customer losses during the Staples acquisition attempt and continued "challenging market conditions."