February 24, 2009 / 2:01 PM / 11 years ago

UPDATE 4-Office Depot posts loss, stock falls 14.5 pct

 * Q4 loss $1.54 bln vs year-ago profit
 * Company says pursuing other sources of liquidity
 * Company to close 118 North America stores in 2009
 (Adds details, updates stock action)
 By Ben Klayman
 CHICAGO, Feb 24 (Reuters) - Office Depot Inc ODP.N posted
a $1.5 billion quarterly loss as small business owners and
retail shoppers cut spending sharply, and said it would seek
new liquidity sources in 2009, sending its shares down 14.5
 Office Depot's sales have suffered as small business owners
and retail consumers spend less on office supplies, a trend
that has also hurt peers OfficeMax Inc OMX.N and industry
leader Staples Inc SPLS.O.
 Office Depot specifically cited lower spending on such
big-ticket items as furniture, computers, printers and TVs in
favor of lower-margin items like ink, toner and paper, as well
as weakness in the key markets of California and Florida.
 "We're disappointed in these fourth-quarter results, which
are largely a barometer for what is happening in our economy,"
Office Depot Chief Executive Steve Odland said on a conference
call. "As these times have gotten tough for our customers, they
have significantly cut back their spending."
 The company said it will close stores and try other ways to
raise money in 2009, including selling and then leasing back
U.S. and European properties, and selling certain accounts
receivable in Europe. It also will see dividends from a joint
venture and tax refunds.
 The closures will result in an "extremely small percentage"
of its 43,000 employees being laid off, a spokesman said.
 Bernstein Research analyst Colin McGranahan called the
company's earnings "dismal," but said its liquidity was
 Office Depot reported a fourth-quarter net loss of $1.54
billion, or $5.64 a share, compared with year-earlier net
income of $18.8 million, or 7 cents a share.
 The quarter included a noncash charge of $1.27 billion, or
$4.54 a share, for goodwill impairment, and pretax charges of
$167 million, or 37 cents a share, for store closures and other
moves announced in December.
 The quarter also included pretax charges of $125 million,
mostly from impairment of North American retail store assets.
 Sales fell 15 percent to $3.3 billion, below the $3.41
billion analysts polled by Reuters Estimates had expected.
 Sales at U.S. and Canadian stores open at least a year,
also called same-store sales, fell 18 percent. Same-store sales
were tracking better in the first quarter, officials said.
 In December, the company said it would close 126 stores and
lay off about 2,200 people, or 4.5 percent of its workforce,
and might exit businesses.
 Office Depot said on Tuesday it would close 118 stores in
North America this year, including some identified in December,
and also plans to exit its retail operations in Japan. At the
end of last year, it had 1,267 North American stores.
 The company plans to open 15 stores in 2009, down from its
previous estimate of 40. It also will close six distribution
centers and another related facility in North America and
Europe. Capital spending plans for 2009 also were cut to about
$150 million from previous plans for $200 million.
 The company expects additional charges this year of about
$186 million related to store closings and other actions.
 Office Depot said it was targeting more than $400 million
in cash benefits from internal initiatives in 2009, more than
half of which will be in hand by early April, executives said.
 Odland said the company expects to be free cash flow
positive in 2009.
 The company said it was cooperating with the Florida and
Missouri attorneys general investigating its pricing practices
for government customers. It also said it is cooperating with
several federal agencies on the same issue and no relief claims
had been made in any of those matters.
 Office Depot shares were down 21 cents at $1.24 on the New
York Stock Exchange after trading as low as $1.03.
 (Editing by Matthew Lewis and Brian Moss)

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