Office Depot to increase marketing after 4% fiscal 2010 sales drop

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Office Depot will increase its marketing to reverse its fourth-quarter and full-year 2010 results, said Neil Austrian, interim chairman and CEO, on a February 22 earnings call.

Austrian said the company will “market our products and services as never before” to improve earnings in 2011. Office Depot's full-year 2010 sales dropped 4% to $11.6 billion, compared with the 2009 fiscal year. Its net earnings were $30 million for full-year 2010, which ended January 30, compared with a loss of $71 million in its previous full fiscal year.

Fourth-quarter 2010 sales decreased 3% year-over-year to $3 billion. Office Depot reported a net loss of $58 million in the quarter, compared with a loss of $77 million in the fourth quarter of 2009.

“We have great associates who are smart and want to win as much as I do,” said Austrian, on an earnings call. “We'll have to change some things going forward. We will improve the customer experience in every channel. We will market our products and services as never before. I'm really excited about the opportunities we have to get Office Depot back on track.”

Office Depot also reported Q4 North American retail division sales of $1.2 billion, a drop of 2% compared with the same period of the prior year. Comparable store sales at the 1,124 stores in the US and Canada that have been open for more than one year decreased 1% in Q4 compared to the prior fiscal year. The division's fiscal Q4 operating profit of $16 million improved by $2 million year-over-year.

“While we run a good retail operation, it's clear we can get better,” said Kevin Peters, president of Office Depot's North American retail division, on an earnings call. “We will improve the in-store shopping experience.”

Fourth-quarter 2010 sales in the North American business solutions division were $798 million, a decrease of 3% compared to the same period of the prior year. The b-to-b division reported an operating profit of $37 million for Q4 2010, compared to $21 million for the same period of the prior year.

This is the best year-over-year sales comparison we've seen in three years,” said Stephen Schmidt, president of North American business solutions at Office Depot. “We are determined to increase our customer mix of small- to mid-sized businesses. We feel we are gaining traction. We are continuing to grow our copy and print business.”

International Q4 2010 sales were $930 million, a drop of 5% compared with the prior year. The company's international division reported an operating profit of $21 million in Q4 2010, compared to $64 million in the same period of the prior year.

Austrian also told investors that the company had yet to find a new CEO.

“Our search committee has met with a number of candidates,” he said. “We will take as much time as we need. Stay tuned.”


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