March 6, 2018
The company has announced its financial results for Q4 2017 and for the full year concluding 30 December 2017.
“I’m pleased that we delivered strong fourth quarter results and achieved full year 2017 adjusted operating income that exceeded our most recent outlook, despite significant revenue pressure throughout the year,” said Gerry Smith, chief executive officer of Office Depot. “Fourth quarter sales trends in the Business Solutions Division continued to improve sequentially and we also saw relative improvement in store traffic recently as a result of strategic shifts in our offer and marketing mix. We are encouraged to see our initiatives to transform the Company beginning to gain traction, including our ability to generate Free Cash Flow to fund these future growth engines.”
Total reported sales for the fourth quarter of 2017 were $2.6 billion (€2.09 billion) compared to $2.7 billion (€2.1 billion) in the fourth quarter of 2016, a decrease of 5 percent. Sales for the full year 2017 were $10.2 billion (€8.2 billion), a decline of 7 percent compared to the prior year.
In the fourth quarter of 2017, Office Depot reported operating income of $59 million (€47.6 million). The Company recognized a net loss from continuing operations in the fourth quarter of 2017 of $48 million (€38.7 million), or $0.09 per diluted share, resulting from a net tax expense of approximately $68 million (€54.8 million) associated with changes to the Company’s U.S. deferred tax assets and tax valuation allowance due to recent tax law reform. The impact of this change has been removed from our adjusted comparisons below.
In the fourth quarter of 2016, the Company reported operating income of $57 million (€46 million), which included the benefit of approximately $15 million (€12 million) from the additional 53rd week. Net income from continuing operations in the fourth quarter of 2016 was $55 million (€44.3 million), or $0.10 per diluted share.
For the full year 2017 period, Office Depot reported operating income of $341 million (€275 million) compared to an operating income of $531 million (€428.3 million) in the prior year period.
“I’m very excited by the positive response we have received from our customers and key business partners since announcing our new strategic direction to transform and strengthen Office Depot,” said Gerry Smith. “This was never more evident than in our BizBox flagship store grand opening in Austin, Texas at the end of January. The BizBox services platform provides small and medium-sized businesses with the core services needed to start and grow their businesses. By delivering an increasing number of service offerings, we create broader and longer-lasting relationships with our customers. We are accelerating a number of initiatives to drive this transformation including expanding the CompuCom technology services footprint, rolling out the BizBox services platform and accelerating the offering of new subscription-based services.”
Accordingly, Office Depot expects sales from the new growth initiatives, including recent acquisitions, to help mitigate but not completely offset negative impacts to 2018 from:
At the end of 2017, the Company substantially completed the integration with OfficeMax which provided significant synergy benefits since the integration first began in 2014. In addition, since retaining the retail footprint is a critical part of the Company’s omni-channel strategy going forward, Office Depot has decided to significantly slow the pace of future store closures. As a result, the Company believes it is now significantly complete with the prior cost savings programs and does not expect material additional benefits from these programs to be realized in 2018.
Accordingly, adjusted operating income in 2018 is expected to be affected by the flow-through impact of lower sales volume, as well as additional factors.
Despite these impacts, the Company expects to deliver strong free cash flow performance in 2018 through a continued focus on driving working capital efficiencies, building upon the improvements initiated in 2017.
“We remain intensely focused on profitably growing Office Depot with a deliberate shift to a more services oriented revenue base while continuing to generate strong free cash flow,” said Gerry Smith. “We recognise that 2018 is a year of transition and that investments are required to advance our Company’s multi-year transformation. However, as we look to 2019 and beyond, I expect that 2018 will be our pivot year as the actions we have already taken, coupled with the additional initiatives and investments we have planned this year, should allow us to grow year-over-year profitability in 2019. I am confident that we have a compelling and differentiated strategy to create a unique omni-channel business services platform that will generate long-term sustainable growth and greater value to our customers, partners and shareholders.”
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