Investors in Office Depot
A look at fourth-quarter and full-year 2003 financial results released today shows just how important the transition -- as well as the move into international markets -- is to Office Depot's future. The North American retail business still led the way, revenue-wise, by turning in more than $5.65 billion of the $12.36 billion in 2003 sales. But revenues, as well as same-store sales, fell year over year. At the same time, costs rose, so segment profit fell more than 25% to $314 million.
The North American "business services" operation, however, managed to boost sales slightly. With non-operating costs falling, segment profit rose about 9.4% to $388 million for the year. The international business, meanwhile -- which includes store-based retail, catalog sales, and contract selling -- also performed. Fueled largely by acquisition, sales rose nearly 70% in U.S. dollars, pushing segment profit up 75% to $371 million.
Put simply, it's the company's "non-traditional" operations that carried the weight in 2003. That's no doubt a large part of what helped push shares up more than 5% in early trading. More important, however, was the company's assertion that investors should expect the North American retail division to provide sales growth, positive "comps" (same-store sales), and improved gross margins in 2004.
Domestic stores still mean an awful lot to Office Depot -- and that segment will need to turn around if the company is to perform as management intends. This is especially important with Staples
Office Depot isn't the only company building a stronger business from "non-traditional" product and service lines. David Gardner's recent stock selection in Motley Fool Stock Advisor spotlights a well-known company that's making waves with new product lines. David's selections are up over 70% since inception compared to the market's 18.7% return in the same time period.
Dave Marino-Nachison is a Motley Fool contributor. He doesn't own any of the companies in this story. He can be reached via email.