Last Wednesday, we saw the impact of the one-time charges announced by Office Depot
It wasn't all bad news for Office Depot, however, because its North American results helped ease the pain of the charges somewhat. The North American retail division reported a 10% increase in sales, a 4% increase in comparable store sales, and operating profit growth of 12% despite the charges. The one-time charges were too much for its net income, however, as Office Depot posted a loss of $30 million for the quarter after the $156 million impact.
The business services division in North America didn't perform as well, but it was still OK. Its sales were up 5%, and it managed an operating profit of $60 million in the quarter. Again, this is lower than the $102 million it earned last year, but charges dragged this year's results lower by $56 million. The unit also had to contend with hurricanes Katrina and Rita, which forced a distribution center to close for one month. However, improved operating efficiencies helped the company overcome the impact somewhat.
Unfortunately for Office Depot -- at least for purposes of the third quarter -- its business is not located solely in North America. The company's international business (which accounts for 24% of overall sales) was downright poor. International sales were 4% lower than last year. Operating profit was down 39% to $59 million, compared with $97 million a year ago. We can blame charges once again, right? Well, not exactly. The charges counted only $10 million against the results. Even without their impact, operating profits fell 28.9% in the international market.
It's never easy to determine exactly how much so-called one-time charges should be held against a company. But when a company is sporting a price-to-earnings ratio approaching 39, which is higher than that of industry leader Staples
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own shares of any of the companies in this article.