By Dhanya Skariachan
April 30 Office Depot Inc reported a
weaker-than-expected quarterly profit on Tuesday and said it
would hold a special meeting with investors to seek approval for
its pending merger with rival OfficeMax Inc.
The news comes as the retailer's board faces heat from its
largest shareholder, Starboard Value LP, and awaits regulatory
approval for the OfficeMax deal.
Office Depot said it would hold a special investor meeting
"as promptly as reasonably possible" after the staff of the U.S.
Securities and Exchange Commission finishes reviewing
The company, which in early April received a request for
additional information from the Federal Trade Commission, said
it was in the process of preparing its response.
Starboard has nominated six candidates to the Office Depot
board and has said the board should be reconstituted whether or
not the OfficeMax deal goes through.
Last week, Starboard decided to go directly to Office Depot
shareholders. It said that because no shareholder meeting had
been scheduled, it "had no choice but to seek to bypass the
ineffectiveness of the current board" by launching a consent
solicitation that would let shareholders vote on the new slate
of directors immediately.
Office Depot reported a first-quarter net loss of $17
million, or 6 cents a share, compared with net earnings of $41
million, or 14 cents a share, a year earlier.
Excluding merger-related costs, restructuring and asset
impairment charges, the company broken even on a per-share
basis. Analysts on average expected a profit of 5 cents per
share, according to Thomson Reuters I/B/E/S.
Sales fell 5.4 percent to $2.72 billion, missing analysts'
average estimate of $2.75 billion.
While sales to small and medium-size businesses and large
corporations rose, sales to clients in the public sector -
mainly in its federal and higher education segments - fell due
to budget cuts.
Office supply retailers face heightened competition from
Amazon.com Inc and Wal-Mart Stores Inc in
selling items ranging from pens and notebooks to furniture.
The office supply industry has seen six consecutive years of
same-store sales declines, and traditional players like Office
Depot and OfficeMax are increasingly losing market share to
online retail powerhouse Amazon, according to analysts.
"Office Depot's first-quarter results highlight continued
challenges in the office products space," Barclays analyst Alan
Rifkin said. He expects results for OfficeMax and industry
leader Staples to show the same challenges.