FINANCE

Office Depot raises outlook on cost-savings from 400 planned store closings

BY Dan Berthiaume

Boca Raton, Fla. – Office Depot has raised its full-year adjusted operating income forecast as cost savings from the closure of some U.S. stores related to its acquisition of OfficeMax are expected to be higher than previously anticipated. As previously announced, Office Depot plans to close at least 400 stores by the end of 2016, with about 165 closures in 2014.

"Based on accelerated synergies and improving execution, we have updated our full year 2014 outlook for adjusted operating income to be not less than $200 million, an increase from our prior outlook of not less than $160 million," said CEO Roland Smith.

Smith said the company has increased the expected annual run-rate synergies from its store closings initiative to at least $100 million by the end of 2016, from its prior outlook of at least $75 million.

Office Depot’s sales rose 58% % in the second quarter, ended June 28, to $3.84 billion, helped by the acquisition of OfficeMax. This compares with $2.42 billion in the year-earlier period, which did not include OfficeMax sales. Same-store sales declined 3%, primarily due to lower transaction counts partially offset by higher average order values

Including OfficeMax results that were not included in the second quarter of the prior year, Office Depot reported a net loss of $190 million, compared to a $64 million net loss a year earlier. The retailer cited merger-related expenses and a tax settlement as adding to its net loss.

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FINANCE

Data breach to cost Target $138 million in Q2, hits earnings

BY Dan Berthiaume

Minneapolis – Target Corp. is reducing its earnings guidance for the second quarter of fiscal 2014 due to the expected $138 million financial impact of its December 2013 data breach, partially offset by $38 million in insurance. Target now expects EPS for the quarter within a range around $0.78, compared with prior guidance of $0.85 to $1 per share.

In addition to breach-related expenses, Target also cited $1 billion in debt retirement expenses and flat same-store sales caused by extensive promotional markdowns and consumer cautiousness as impacting its earnings more than previously anticipated. John Mulligan, interim president, CEO and CFO of Target, struck an optimistic tone about future performance.

“While the environment in both the U.S. and Canada continues to be challenging, and results aren’t yet where they need to be, we are making progress in our efforts to drive U.S. traffic and sales, improve our Canadian operations and advance Target’s digital transformation,” said Mulligan. “With last week’s announcement that the board has chosen Brian Cornell as Target’s next chairman and CEO, we are committed to working together to accelerate Target’s transformation and become a leading omnichannel retailer.”

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FINANCE

CVS beats net income estimates in Q2

BY Dan Berthiaume

Woonsocket, R.I. – CVS Caremark Inc. beat Wall Street estimates with net income of $1.2 billion in the second quarter of fiscal 2014, up 11% from $1.1 billion in year-ago period. CVS cited increased generic drug dispensing rates and favorable Medicaid reimbursement from the state of California as aiding net income results.

Net revenues also grew 11% to $34.6 billion, from $31.2 billion. Increased pharmacy services sales and revenue from the new Specialty Connect program for holders of specialty prescriptions boosted net revenue totals. Same-store sales grew 3.3%, negatively impacted by the elimination of tobacco sales but aided by a shift in the Easter holiday.

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