A tough run for its retail office superstore division dragged down ODP Corp. third-quarter results as the company put more emphasis on business-to-business operations.
Net income from continuing operations was $68 million, or $2.04 per diluted share, versus $82 million, or $2.09 per diluted share, in the year-prior period. Adjusted for one-time events, net income from continuing operations was $24 million, or 71 cents per diluted share, versus $85 million, or $2.17 per diluted share, in the period a year earlier, the company reported.
On average, analysts polled by Yahoo Finance expected ODP to deliver earnings of $1.60 per adjusted diluted share and revenues of $1.82 billion in the quarter.
Sales were $1.78 billion versus $2.01 billion in the year-previous quarter. Operating income was $102 million versus $108 million in the period a year before as adjusted operating income came in at $41 million versus $112 million.
In the Office Depot Division, which includes Office Depot and OfficeMax store and e-commerce retail operations, sales were $861 million in the third quarter, down 15% year over year. The lower sales performance resulted from the company having 53 fewer retail locations in service, which was associated with planned store closures, as well as lower demand in major product categories, lower average order volume, and lower online sales compared to the 2023 period. The company closed nine retail stores in the third quarter and had 885 stores at the period’s end.
Sales slipped 10% on a comparable basis. Store and online traffic slowed year over year due to macroeconomic factors causing sluggish consumer activity and demand during the highly competitive back-to-school season, ODP reported.
In addition, the company announced it was scaling back full-year guidance including for adjusted diluted earnings per share, now $3.10-$3.80 from $4.25-$5; and it had sold the Varis tech-enabled B2B indirect procurement marketplace subsequent to the third quarter’s end.
In announcing the third quarter activity, Gerry Smith, ODP Corp. CEO, said, “Our results in the quarter were below expectations, primarily driven by our retail division, as challenging macroeconomic conditions impacted our performance. Weaker macroeconomic conditions led to more cautious consumer and business spending, impacting demand in our B2C and B2B divisions during the highly competitive back-to-school season. This was further compounded by major hurricanes negatively affecting our customer base and operations in our largest service areas.”
Smith maintained, despite the obstacles, “We’re making significant progress on our B2B pivot and initiatives to improve top-line trends. We’re leveraging our differentiated core strengths to pivot towards higher growth B2B opportunities, and we are beginning to see promising traction at both our ODP Business Solutions and Veyer Divisions. At Veyer, we continue to attract new third-party relationships, including launching service for one of the world’s largest social media-focused e-commerce platforms, positioning our supply chain business to pursue growth in a new high-value industry segment. At Business Solutions, we secured one of the largest multi-year B2B contracts in our history, potentially generating up to $1.5 billion in revenue over a 10-year period. Additionally, we are making progress and actively pursuing opportunities in new, higher growth, adjacent industry segments where our core strengths also resonate. We’re building key distribution relationships in growing industry segments that spotlight our supply chain proficiency, our ability to supply products beyond office supplies, and our commitment to service excellence.”
Smith added ODP is investing “in our core business to capture these growth opportunities and generate the highest return for shareholders. Considering these core investments, along with our year-to-date performance against the challenging macroeconomic backdrop, we are amending our guidance for 2024. Additionally, we advanced Project Core and streamlined our operations by completing the sale of Varis, while continuing to assess and refine our retail strategy. While the progress we are making will take time to reflect in our results, we are confident that we’re on the right path, and our team is committed and focused on driving operational excellence to create long-term shareholder value.”
