Office Depot’s emphasis on business services paying off
Office Depot’s transformation from a traditional office supplies retailer to more of a business services company appears to be paying off as the company posted income and sales that topped estimates, fueled by big increases in its business solutions division and services divisions.
The office supplies retailer’s net income totaled $60 million, or 11 cents a share, in the third quarter, down from $92 million, or 18 cents a share, in the year-age period. Adjusted per-share earnings came to 13 cents, ahead of estimates of 12 cents.
Sales rose 10.2% to $2.887 billion, also better than expected. Product sales were up 1.1%, while service revenues grew 123.7%, driven primarily by the service revenues contributed by the CompuCom acquisition. Services revenue represented approximately 15% of total company sales, up from 7% last year.
“CompuCom’s unique capabilities are a competitive differentiator allowing us to grow our services business and to attract new customers and distribution partners,” said Gerry Smith, CEO of Office Depot.
Retail sales, however, continued to decline. Sales fell 6% to $1.3 billion in the quarter, which the chain attributed partially to planned store closures.
Office Depot raised its full-year sales guidance to $11.0 billion from $10.8 billion and reiterated its full-year 2019 sales guidance of $11.1 billion.
“We’re making excellent progress on our strategy and we have again delivered strong top line growth and generated significant free cash flow,” said Smith. “A primary focus during this phase of our transformation is to recapture top-line sales growth and strengthen our core, and I’m pleased to report that our Business Solutions Division delivered their best quarter in over a decade, with sales up 6% in total including recent acquisitions, and most importantly, up 1% organically.”
The retailer’s investments in building its services capabilities are also continuing to pay off, according to Smith, with service revenues again growing double digits in both its BSD and retail divisions.
“Overall, we are making great progress on our transformation and remain confident that we have the right strategy in place to drive sustainable, profitable growth in the future,” he said.
Camuto Group purchase finalized
It’s a done deal.
Authentic Brands, a global brand development, marketing and entertainment company, announced the purchase of a majority stake in the intellectual property of the Camuto Group’s proprietary brands including Vince Camuto, Louise et Cie, Sole Society, CC Corso Como, Enzo Angiolini and others, in partnership with DSW Inc. The acquisition links ABG to one of the largest footwear authorities in North America and boosts the value of its portfolio of global brands to more than $8.7 billion in annual retail sales. The deal was announced in October.
As part of the acquisition, ABG assumes the marketing, business development and licensing functions the Camuto Group’s proprietary brands. DSW takes on the Camuto Group operation including its design, sourcing, production and wholesale infrastructure.
“As one of our largest multi-brand acquisitions to date, the addition of the Camuto Group portfolio significantly grows ABG’s stake in the footwear and accessories market,” said Jamie Salter, chairman and CEO of ABG. “We see incredible opportunity for expansion, both from a category and distribution standpoint, and plan to leverage our international expertise and network of best-in-class partners to propel these iconic brands into their next phase of global growth.”
ABG and DSW Inc. have partnered to own the intellectual property of the Camuto Group’s proprietary brands, with ABG taking the majority stake of 60% and DSW taking the balance of 40%. Building on the strength of the Camuto Group organization, the partnership will put a renewed focus on licensing the brands across existing lines in footwear, handbags and jewelry, while developing new lifestyle categories and expanding into key international markets.
It’s been a busy year for ABG, whose of strategic moves in 2018 also includes the acquisitions of Nautica, Nine West and Bandolino.
David’s Bridal reportedly weighing Chapter 11 filing
A heavy debt load is putting pressure on David’s Bridal.
The bridal apparel retailer is making preparations for a bankruptcy filing if it can’t reach an out-of-court deal with its creditors, reported mysantonio.com, citing a Bloomberg report. David’s Bridal has a debt load of about $760 million which it is looking to ease with a pre-negotiated restructuring plan either in or out of court, the report said.
“We are engaged in discussions with our lenders in order to reach a mutually agreed-upon resolution designed to strengthen our balance sheet so we can increase our financial flexibility and further invest in our business,” a representative for David’s said in a statement emailed to Bloomberg.
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