Office Depot Parent ODP Faces Revenue Dip In Q4, Counters With Ambitious 'Project Core' Initiative

The ODP Corp ODP reported a fourth-quarter fiscal 2023 sales decline of 14.3% year-over-year to $1.81 billion, missing the consensus of $1.84 billion.  

The year-over-year revenue decline was due to lower sales in its Office Depot consumer division, primarily due to 64 fewer retail locations in service versus the prior year and lower retail and online consumer traffic and transactions. 

ODP Business Solutions Division reported sales (external) of $902 million, down 10% Y/Y. Office Depot Division reported sales (external) of $893 million, down 18% Y/Y in the quarter.

Adjusted operating income was $43 million, down from $58 million a year ago, and the margin contracted by 37 bps to 2.4%.

Adjusted EBITDA in the quarter totaled $73 million (-18% Y/Y), and the margin contracted by 18 bps to 4%.

ODP’s adjusted EPS improved to $0.92 from $0.85 a year ago, beating the analyst consensus of $0.78.

Operating cash flow from continuing operations for the year totaled $331 million and adjusted free cash flow was $235 million, versus $237 million and $201 million, respectively, in the prior year.

At the end of the quarter, the company had $1.1 billion of total available liquidity, including $392 million in cash and equivalents.

ODP announced “Project Core,” an enterprise-wide program focused on streamlining operations and enhancing focus on core business.

Buyback: The company repurchased 6 million shares for $298 million in 2023. Additionally, as a component of Project Core, the company announced a new $1 billion, 3-year share repurchase authorization, replacing its prior authorization, valid through 2025, which had approximately $530 million available at the end of February 2024.

2024 Outlook: ODP expects a sales decline of 2%-5% and Adjusted EPS of $5.60 – $5.80 versus the $5.70 consensus. It sees adjusted EBITDA of $410 million to $430 million and adjusted operating income of $280 million to $300 million.

 “While our guidance assumes incremental improvement in the overall macroeconomic environment throughout 2024, we remain cautious on the state of the overall US economy, primarily workforce employment and the consumer, as well as international trade policies and agreements that could further impact the level of consumer and business activity,” commented Anthony Scaglione, executive vice president, and chief financial officer of ODP.

Price Action: ODP shares are trading higher by 6.179% at $56.25 on the last check Wednesday.

Photo: Lukas from Pixabay.