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Office Depot puts positive spin on negative performance

BOCA RATON, Fla. — Despite reporting a wider net loss and sales declines for its second quarter of 2012, Office Depot remains confident in its key goals.

“Although the second quarter was challenging from both a revenue perspective and a year-over-year results comparison due to significant non-recurring benefits in 2011, we continued to execute our key initiatives and increased gross margin for the fifth consecutive quarter,” said Neil Austrian, chairman and CEO of Office Depot. “I’m pleased that the North American Business Solutions Division delivered a solid operating performance again this quarter.”

The company reported that total sales for the quarter were approximately $2.5 billion, down 7% compared to the second quarter of 2011. On a constant currency basis, second quarter 2012 sales were down approximately 5% versus prior year.

Net loss for the quarter was $64 million, or 23 cents per diluted share in the second quarter of 2012, compared with a net loss of $29 million or 11 cents per share in the second quarter of 2011.

Sales at Office Depot's North American retail division were down 8% to $994 million, due in part to the closing of Canadian stores and additional closures in the United States since the second quarter of 2011. Comparable-store sales decreased 4%, compared with a 6% decline for the first quarter of 2012. The decline was attributed to poor performance in computers and related products.

At the end of the second quarter of 2012, Office Depot operated 1,117 stores in the United States and Puerto Rico. The division opened no new stores and closed six during the second quarter of 2012.

Sales at Office Depot's business division decreased 1% to approximately $796 million, a 1% decrease compared to the prior year. Sales in the direct channel were essentially flat, compared with the same period in 2011. Sales in the contract channel decreased 1% but were essentially flat after considering a customer incentive change that positively impacted results last year. Contract channel sales to large accounts increased, while sales to public sector customers declined in the second quarter, reflecting their continued budgetary pressures. Sales to small- to medium-sized business customers increased slightly in the second quarter. By product category, sales increased in furniture, Copy and Print Depot, printers, promotional products, and cleaning and break room supplies, while total sales of office supplies were relatively flat compared with the second quarter of the prior year.

The international division reported second quarter 2012 sales of $717 million, a decrease of 13% in U.S. dollars and a decrease of 6% in constant currency compared to the prior year. The second quarter of 2012 included fewer working days compared to the same period last year which contributed to the decline in sales in constant currency.

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