Office Depot Q2 beats Street as new strategy builds momentum
Office Depot’s transformation into a business services company is starting to pay off.
The company reported net income of $19 million, or 3 cents a share, in the second quarter, down from $21 million, or 4 cents a share, in the year-ago period. Adjusted per-share earnings came to 5 cents, ahead of analysts’ estimates of 3 cents.
Total revenue rose 11% to $2.63 billion, also ahead of estimates. Sales at Office Depot’s business solutions division rose 4%, driven by acquisitions and e-commerce growth. In fall 2017, the company acquired CompuCom, a provider of IT services, products and solutions. It followed that up with the acquisition of launch of BizBox, a business services platform that is offered on a subscription basis.
Sales in Office Depot’s retail division, however, decreased 5% to $1.1 billion. Same-store sales fell 2% amid fewer transactions and lower average order values.
“I am extremely pleased with our performance in the second quarter as the execution of our strategy is driving improved sales trends across all three of our operating divisions,” said Gerry Smith, CEO of Office Depot. “Sales in the Business Solutions Division were up an impressive 4% in the quarter driven by our acquisition strategy and growth in the adjacency categories beyond office products. I’m also encouraged by the early success of our initiatives to increase services, which now represent 16% of total sales.”
Office Depot’s new emphasis is reflected in its flagship in Austin, Texas. The location was revamped into a services-led shopping experience that puts the spotlight on offerings from its BizBox platform, which provides end-to-end services (from logo and website design to payroll, tech and more) to help small to mid-sized businesses start and grow their companies.
Office Depot provides business services and supplies, products and technology solutions with an omnichannel platform that includes approximately 1,400 stores, online presence, and dedicated sales professionals and technicians. Its banner brands include Office Depot, OfficeMax, CompuCom and Grand&Toy.
Rite Aid updates full-year outlook
Despite that its shareholders will be voting on its proposed sale to Albertsons Companies in a matter of days, Rite Aid has lowered its outlook for fiscal year 2019.
The Camp Hill, Pa.-based company revised the outlook it issued in April based on a more stable reimbursement rate environment, fees under the Walgreens Boots Alliance transition services agreement, generic drug purchasing and other factors. However, the new figures don’t include the expected impact of its proposed merger with the privately-held grocer, Albertsons.
Rite Aid said it expects its generics purchasing efficiencies to come in $80 million less than expected in April, which has an effect on its adjusted EBITDA, net loss and adjusted net loss per diluted share estimates. It now expects adjusted EBITDA to stand between $540 million and $590 million, down from the range of $625 million to $675 million it had expected earlier this year.
The company projects its net loss to be between $125 million and $170 million, despite initially projecting a net loss of between $40 million and $95 million. Adjusted net loss per diluted share is projected to be between $0.00 and -$0.04. The company had previously projected net income per diluted share to range from $0.02 to $0.06.
The new forecast is Rite Aid’s latest attempt to build support for shareholders to vote in favor of Albertsons to acquire the drugstore chain. The deal is valued at $24 billion, and it will also take the privately held grocer public.
The move comes on the heels of Rite Aid sending a letter to shareholders detailing the merits of the proposed merger, along with the company’s recommendation that shareholders should vote in favor of the transaction.
Women’s apparel retailer extends credit agreement
Christopher & Banks Corp. is getting a reprieve on its credit facility.
The women’s apparel retailer entered into an agreement to extend its current senior secured revolving credit facility of up to $50 million. The deal also includes an additional $5 million through a first in, last out (FILO) loan, which is as an advance on unsold merchandise.
The transaction provides funding through August 3, 2023. The prior facility was scheduled to expire in September 2019. Wells Fargo Capital Finance will administer the loan.
The amount of credit that is available under the amendment is determined to be a percentage of the value of eligible inventory and credit card receivables. The funds may be used for working capital, issuance of letters of credit, capital expenditures and other corporate purposes, according to the company.
“We are very pleased to have extended our credit facility through 2023,” said Keri L. Jones, president & CEO of Christopher & Banks. “Although we do not have any outstanding borrowings under this facility, the available funds will provide additional support for us as we execute on our operating and strategic plans.”