What happened

Shares of ODP (NASDAQ:ODP) fell as much as 11.2% on Wednesday, following the release of mixed fourth-quarter results.

So what

The parent company of office supplies retailers OfficeMax and Office Depot saw fourth-quarter sales fall 8.8% year over year to $2.29 billion. Adjusted earnings declined from $1.24 to $0.55 per diluted share. The Street consensus had pointed to earnings near $0.82 per share on revenue in the neighborhood of $2.26 billion. ODP edged past the revenue estimates but fell far short of analysts' bottom-line targets. Management declined to offer guidance for the next quarter or fiscal year.

Sales fell 6% in the retail division, 10% in the business solutions segment, and 13% in the CompuCom technology consulting arm. Operating profits rose in the retail business but plunged in the business solutions market. The COVID-19 pandemic has lowered order volumes from business customers while also driving the product mix in a less profitable direction.

A dollar bill, folded like origami into an arrow trending down.

Image source: Getty Images.

Now what

ODP's management took this opportunity to update investors on the proposed buyout offer from privately held rival Staples.

"We believe a joint venture that combines only the retail and consumer facing operations of both Office Depot, OfficeMax and Staples would be a viable path to both maximize the synergies and efficiencies for both companies while equally sharing the risks and benefits between our companies," CFO David Bleisch said on the earnings call, "and would also help the combined business maintain competitiveness against non-traditional retailers and optimize ongoing choices for consumers."

Meanwhile, ODP is knee-deep in a strategy shift that will turn away from the consumer-facing retail market and focus on business-to-business services. The idea is to generate more generous profit margins and sustainable sales growth in the enterprise market, leaving the price-based competition of the consumer market to the e-commerce wolves.

ODP is a turnaround story in progress, and there are more question marks around the strategy shift than I would like. It's no surprise to see investors brushing off the modest revenue surprise to focus on the significant earnings miss today.

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