Upcoming AWS Coverage on Finish Line Post-Earnings Results
LONDON, UK / ACCESSWIRE / March 17, 2017 / Active Wall St. announces its post-earnings coverage on Office Depot, Inc. (NASDAQ: ODP). The Company disclosed its fourth quarter fiscal 2016 and full year fiscal 2016 financial results on March 01, 2017. The office supplies retailer exceeded top- and bottom-line expectations. Register with us now for your free membership at:
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One of Office Depot’s competitors within the Specialty Retail, Other space, The Finish Line, Inc. (NASDAQ: FINL), is estimated to report earnings on March 23, 2017. AWS will be initiating a research report on Finish Line in the coming days.
Today, AWS is promoting its earnings coverage on ODP; touching on FINL. Get our free coverage by signing up to:
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Earnings Reviewed
Office Depot’s total reported sales for the quarter ended December 31, 2016, were $2.73 billion, down 2% compared to $2.77 billion in Q4 2015. The Company’s revenue numbers came above analysts’ consensus of $2.71 billion. Office Depot’s sales for FY16 were $11.02 billion; falling 6% compared to the prior year’s sales of $11.73 billion. Fourth quarter and full year sales benefited from the impact of a 53rd week in FY16 of approximately $143 million.
In Q4 2016, Office Depot reported operating income of $57 million compared to Q4 2015 operating income of $42 million. Adjusted operating income for the reported quarter was $111 million compared to an adjusted operating income of $83 million in Q4 2015. For FY16, Office Depot reported operating income of $531 million compared to operating income of $183 million in the prior year’s same period.
Office Depot’s Q4 2016 net income from continuing operations was $55 million, or $0.10 per diluted share. Adjusted net income from continuing operations for Q4 2016 was $59 million, or $0.11 per diluted share, compared to adjusted net income from continuing operations of $35 million, or $0.06 per diluted share, in Q4 2015. Earnings results also came in above market estimates of $0.10 in EPS. The Company’s FY16 adjusted net income from continuing operations was $251 million, or $0.46 per diluted share, compared to adjusted net income from continuing operations of $222 million, or $0.40 per diluted share, in FY15.
Division Results
During Q4 2016, Office Depot’s North American Retail Division sales were $1.37 billion, slightly lower compared to the prior year’s corresponding period. Sales were favorably impacted by an increase in its buy online-pick up in store program and the inclusion of the 53rd week. Retail division’s operating income was $62 million, or 4.5% of sales, in Q4 2016, approximately flat to Q4 2015. During the reported quarter, the Company closed 65 stores and ended 2016 with a total of 1,441 retail stores in the North American Retail division.
For Q4 2016, Office Depot’s North American Business Solutions Division sales were $1.36 billion, relatively flat compared to the prior year period. Excluding approximately $56 million of sales during the 53rd week, sales declined 5% in constant currency with contract channel sales down while direct channel sales were up versus the prior year’s same period. Business Solutions Division operating income was $75 million, or 5.5% of sales, in the reported quarter compared to $39 million, or 2.9% of sales, in the prior year’s comparable period.
Sale of European Business
On September 23, 2016, Office Depot announced an agreement to sell its European business, which was successfully completed on December 31, 2016. Following the closing, the Company’s European business is no longer part of the Company’s ongoing operations.
Office Depot stated that its international businesses located in Australia, New Zealand, South Korea, and mainland China continue to be actively marketed for sale and are reported as discontinued operations, with the expectation that the divestiture process will be completed in 2017. The Company currently plans to retain its sourcing and trading operations in Asia and the results for these operations are reported as an “Other” segment outside of the North American segments. These ongoing sourcing and trading businesses contributed $18 million in sales and $1 million in operating income for FY16.
Balance Sheet and Cash Flow
As of December 31, 2016, Office Depot had $0.8 billion in cash and cash equivalents and approximately $1.0 billion available under the Amended and Restated Credit Agreement. Total debt was $387 million, excluding $798 million of non-recourse debt related to the credit-enhanced timber installment notes.
For the full year 2016, the Company generated $492 million of cash provided by operating activities of continuing operations, including the $250 million Staples termination agreement fee. Capital expenditures were $111 million in 2016. Free cash flow from continuing operations for the full year 2016 was $380 million.
For the full year, the Company paid approximately $26 million in dividends. During Q4 2016, the Company repurchased approximately 14 million shares at a total cost of $51 million. As of December 31, 2016, Office Depot had repurchased approximately 37 million shares in 2016 at a total cost of $132 million, with $118 million remaining available for repurchase under the current $250 million buyback authorization.
Outlook
Office Depot expects total Company sales in 2017 to be lower than 2016, primarily due to the impact of store closures, prior year contract customer losses, one less selling week, and continued challenging market conditions. The Company expects to close approximately 75 stores in 2017.
Office Depot continues to expect total annual run-rate merger synergy benefits of more than $750 million, with the majority of the remaining benefits expected to be achieved by the end of 2017.
As part of the new cost saving program announced last year, Office Depot expects to deliver over $250 million in annual benefits by the end of 2018 with about half of those benefits anticipated to be realized in FY17. The Company continues to expect to achieve approximately $500 million in adjusted operating income in FY17. Office Depot anticipates free cash flow from continuing operations to be more than $300 million in FY17.
Stock Performance
At the closing bell, on Thursday, March 16, 2017, Office Depot’s stock slipped 1.06%, ending the trading session at $4.66. A total volume of 4.58 million shares were traded at the end of the day. In the last month and previous six months, shares of the Company have advanced 3.26% and 33.15%, respectively. Moreover, the stock gained 3.72% since the start of the year. The Company’s shares are trading at a PE ratio of 3.74 and have a dividend yield of 2.15%.
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