Office Depot (NYSE:ODP) swung to a first-quarter loss over a year ago profit and slipped below Wall Street estimates, impacted primarily by softer demand in North America.
The company has been struggling to recoup from the recession and keep up with larger rival Staples (NASDAQ:SPLS), while competition from the industry’s third-largest player, OfficeMax (NYSE:OMX), continues to heat up.
The retailer has faced a slew of problems this year, having recently disclosed that a material weakness in its internal controls failed to prevent or identify an improver tax accounting that led to the restatement of its 2010 results. It also announced that it recently settled charges of improper pricing.
The Boca Raton, Fla.-based company on Tuesday said it booked a first-quarter net loss of $15 million, or 5 cents a share, compared with a profit of $20 million, or 7 cents a share, in the same quarter last year, missing the Street’s view of a 5-cent profit.
Earnings were hit primarily by charges related to restructuring and integration activity costs as part of its strategic initiative to improve future operating performance.
Revenue for the office supplier was $2.97 billion, down 3% from $3.07 billion, virtually matching average analyst estimates polled by Thomson Reuters of $2.98 billion.
“Our first-quarter operating results were lower than the prior year due to the impact of lower sales,” said Office Depot CEO Neil Austrian “However, we are encouraged by the progress we’re making throughout the enterprise to improve the future operating performance of the company.”
Sales took a hit in North America, where they slumped 2% from the year-earlier period due to weaker demand at stores open at least a year, partially offset by a slight improvement in average order values. Severe winter weather lowered customer transaction counts.
The company’s North American business solutions division also fell 3%, topped by a 5% drop in its international unit.
The company said it continues to search for a new chief executive and will continue to drive positive changes in the interim. Looking ahead, Office Depot expects second-quarter same-store sales to be slightly positive compared with the same period in 2010.