Retail

Office Depot Closes More Stores In Face Of Falling Profits

Office Depot came to the plate with its announced profit for Q2, $210 million — a big step up from the $58 million in losses they were reporting during Q2 2015.

Those gains were credited to the first of of “store optimization” efforts that have been underway since 2014. The effort has seen 400 stores shuttered, with 300 more scheduled for the block in the next three years.

Revenue in Q2 clocked in at $3.22 billion, down 6 percent from $3.4 billion in the same quarter last year. But they did manage to beat the street’s consensus estimate of $3.20 billion for revenue. Office Depot has also pledged to increase its supply chain capacity and expand its product line to boost consumer interest. The somewhat struggling office chain has also announced plans to reformat their stores around small physical footprints and curated product lines. Twenty-four of these small scale, 15,000-square-foot stores are scheduled to open by the end of this year, with 100 more planned by the end of 2017.

The big question is: Can that change of store design reverse Office Depot’s big falling sales problem? North American sales were down 7 percent to $1.2 billion during Q2 from $1.3 billion in the prior year. In addition, same-store sales declined 1 percent and Office Depot’s business solutions segment (which ships office supplies under contract to business customers) suffered a 7-percent drop.

And, according to Forrester, things could get worse for Home Depot before they get better. Though the B2B eCommerce market will swell to $1.13 trillion by 2020, and Office Depot could be one of those beneficiaries given what they sell, they likely won’t be.

Amazon will be, since 92 percent of those B2B buyers also told told Forrester they’ve used Amazon to research a purchase for work — and 82 percent of B2B buyers have used Amazon to buy for work.

The Street is clearly worried Office Depot just can’t compete. Shares are down over 40 percent on the year, though trading did perk up slightly after earnings were announced.

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