Office Depot (NASDAQ: ODP) reported Q1 EPS of $0.07, in-line with the analyst estimate of $0.07. Revenue for the quarter came in at $2.77 billion versus the consensus estimate of $2.76 billion.

• Reported Sales of $2.8 Billion, down 2% from Prior Year Period
  • BSD Division Revenue up 1%
  • Retail Division Same Store Sales down 4%
  • CompuCom Revenue down 4%
  • Services Revenue Growth in BSD and Retail Divisions up 13% and up 16%, Respectively
• Operating Income of $24 Million and Net Income from Continuing Operations of $8 Million
• Adjusted Operating Income of $67 Million Primarily Driven by Lower Performance at CompuCom
• Announces Business Acceleration Program to Improve Profitability and Enable Growth Investments
• Updates 2019 Guidance

“Our first quarter results were disappointing driven primarily by poor performance at our CompuCom division,” said Gerry Smith, chief executive officer of Office Depot. “We are taking decisive actions and making numerous improvements in our sales and operational processes to place this business back on-target with its long-term expectations. That said, our strategy remains compelling and we are steadfast in our plan to transform Office Depot into a leading provider of business products and services through our world-class integrated distribution platform. We delivered top-line results in our core BSD and Retail divisions in-line with expectations, supported by strong service revenue growth of 13% and 16%, respectively, in these divisions. We also continued to make progress on additional transformation initiatives, including expanding the use of our supply chain with third parties and enhancing our retail footprint to include store-within-a store, co-working and expanded product offering pilots, as well as advancing our collaboration efforts with Alibaba.com,” Smith continued.

“As a means to accelerate our transformation, enhance our profitability and fund future growth initiatives, our Board of Directors formally approved earlier this week our Business Acceleration Program. This is a company-wide, cost reduction and business improvement program that was developed to create a leaner and more competitive enterprise, driving down costs, improving service delivery, and providing additional means to fund reinvestment for future growth. The program initiatives are enterprise-wide and include implementing organizational realignments, leveraging the use of technology and automation in our facilities and offices, all while reducing discretionary spending. We expect these actions will have a positive impact to our operations beginning in the second half of 2019, generating at least $40 million in savings this year and more than $100 million in annual savings at full run-rate,” he added.

GUIDANCE:

Office Depot sees FY2019 revenue of $11.1 billion, versus the consensus of $10.9 billion.

“We believe the actions underway to drive top-line revenue growth coupled with the initiatives we’re pursuing to enhance our competitiveness, improve profitability and create the wherewithal to invest in future growth capabilities will generate greater value for all of our stakeholders,” said Smith. “We expect profitability to improve at CompuCom over the course of the year as a result of the actions already underway. These actions, coupled with the expected benefits from our Business Acceleration Program, are expected to have a positive impact to our profitability in 2019 and beyond,” he added.

For earnings history and earnings-related data on Office Depot (ODP) click here.