Office Depot, Inc. (“Office Depot,” or the “Company”) (NASDAQ: ODP), a leading integrated business-to-business (“B2B”) distribution platform of business services and supplies, products and technology solutions, recently declared preliminary estimated results for the 1st quarter finished March 31, 2K19.
The Company will report actual financial results for the 1st quarter 2K19 and provide updated full-year 2K19 guidance on its forthcoming earnings declarement and conference call planned for May 8, 2K19. For the 1st quarter of 2K19, the Company anticipates to report revenue of about $2.76B and adjusted operating income1 of about $65M. The primary driver of the anticipated 1st quarter 2K19 results was lower than expected operating performance at the Company’s CompuCom division.
The Company’s CompuCom division is expecting to report an operating loss of about $15M in the 1st quarter of 2K19, mainly driven by lower than expected revenue from existing customer projects compounded by less than commensurate reductions in associated costs. Profitability was further pressured by ongoing expenditures to develop and market additional service offerings. The Company has recently undertaken several actions to improve its future operating performance.
These include reform its operational structure to improve service velocity and efficiency, reorganizing its customer-facing organization to better line up with customer needs, and realigning the sales team to more effectively identify new opportunities to increase penetration of existing customers and speed up cross-selling opportunities. The Company anticipates that these and other actions will place CompuCom on a path to get back on track with its long-term expectations, delivering improved development and profitability in the future.
The Company’s Business Solutions Division (“BSD”) is expecting to report operating income of about $46M in the 1st quarter of 2K19. This performance was influenced by paper and paper related costs raised that could not be completely passed through to customers due to the timing of contractual limitations.
Paper costs have raised over 20% through the past 12 months and the Company is pursuing several programs to mitigate the impact of such cost raised going forward. In addition, lower eCommerce related sales coupled with investments in order generation and eCommerce capabilities, counting those associated with the partnership agreement recently declared, adversely influenced results in the quarter.
The Company’s Retail division is expecting to report operating income of about $66M in the 1st quarter of 2K19. The Company’s success in raising its service offerings is mitigating some of the broader industry trends associated with extra traditional office products.
The Company is continuing to evaluate and apply for additional programs in its retail footprint, improving conversion and product assortment mix, in addition to exploring store-within-a-store and co-working opportunities, which to date have shown near the beginning signs of success.