For the third quarter, the office product retailer saw a top-line increase of 10%. Both domestic and international markets contributed double-digit growth. With same-store sales up 3% year over year, it's evident that Office Depot is finding growth in other areas.
Acquisitions are one means to achieve that growth. Office Depot's latest acquisition was Papirius, which gives the company a strong foothold in Eastern Europe. Given the rapid economic growth rates we're beginning to see in the old Eastern Bloc nations, the acquisition makes perfect sense.
New store openings are also a key growth driver for the company. It has launched 76 new stores this year already, with a full-year objective of 115 new sites. For FY 2007 and 2008, it plans to open 150 and 200 new stores, respectively. Management stated in the conference call that it believes Office Depot should be able to double its store count from its current level.
Existing stores are getting a makeover as well, which is helping to drive customer traffic. Office Depot plans to remodel 165 stores this year, and expects to refresh all existing sites within the next two years.
When the customers show up at an Office Depot, they're not only finding a better-looking store layout, but also a better product mix, according to management. In conjunction with category management, that's helping Office Depot expand its gross margins. So far, the widening margins have more than offset the cost increases associated with remodeling. Operating margins also increased substantially to 5%, from 2.8% (adjusted for charges) in the year-ago period.
Before concluding, I want to highlight a new product brought up during the call. I'm a big advocate of corporate social responsibility, so I was particularly pleased to hear of Office Depot's launch of Green Book, a listing of environmentally friendly products. It's been popular among European customers; let's hope its success goes global.
Starting with a single store in south Florida 20 years ago, Office Depot has seen its share of good and bad days. In recent times, the good have far outweighed the bad; indeed, there's a party going on over at Office Depot. Count me in as one investor who's missed out on all the fun.
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Fool contributor Jeremy MacNealy is spending this year at Duke University, writing a law and ethics paper on corporate social responsibility. He has no financial interest in any company mentioned. The Motley Fool is investors writing for investors.