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Office Depot warns on 4Q
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November 6, 2000: 9:54 p.m. ET
Retailer expects same-store sales, earnings to fall short of expectations
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NEW YORK (CNNfn) - Office Depot Inc., the No. 1 retailer of office products, warned Monday that it expects same-store sales to drop significantly in the fourth quarter and earnings to fall far short of expectations due in part to weaker computer and accessory sales.
The Delray Beach, Fla.-based retailer, with more than 700 stores, will also incur a fourth-quarter charge of $2 million to reorganize its call center. This includes a total charge of about $4 million, beginning in the fourth quarter and lasting over the following 12 months, to cover severance and other employee transition costs. The company also would pay $22 million to upgrade its technology.
Office Depot said it expects earnings per share to be far below analysts' estimates of 17 cents, based on a survey by First Call/Thomson Financial.
The company said in July that it expected flat store sales in the fourth quarter, but announced Monday that sales during October and in early November continued a downward trend.
 "While we are seeing some softness in many categories, comparable sales performance in our North America retail stores continues to be impacted by weakness in desktops, laptops, monitors and printers and the related 'market basket' of higher margin goods historically linked to purchases of these items," Bruce Nelson, chief executive, said in a prepared statement.
The retailer said that if there is continued weakness in these products, as well as higher warehouse costs, the same-store sales would slip to the negative single digit range.
"In summary, while it is still early in the quarter, if these trends continue, combined with the anticipated highly competitive environment for technology products during the upcoming holiday season, we would expect to see further pressure on earnings from ongoing operations," Nelson said.
The retailer has said that it has finished a review of its U.S. call-center operations and will consolidate 24 current operations into seven expanded customer-service centers. The reorganization won't affect the number of call-center workers.
The company said that results from its business-services group and international operations are still on track to meet earlier expectations of sales growth in the "mid- to high- teens."
The company will release the results of a business review in early 2001.
Shares of Office Depot (ODP: Research, Estimates) closed down 69 cents at $6.94, below the 52-week high of $14.81.
--from staff and wire reports 
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Office Depot
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