After reporting a positive earnings surprise of 14.3% in the final quarter of 2017, Office Depot, Inc. ODPdelivered in line earnings in the first quarter of 2018. Meanwhile, the top line came ahead of the Zacks Consensus Estimate for the third straight quarter.
Favorable results and strategic initiatives, including strengthening of core businesses and expansion of service and subscription offerings, prompted management to provide an encouraging outlook for 2018.
Moreover, improvement in Business Solutions and CompuCom divisions is also likely to benefit the company going forward. The company has undertaken a strategic review of business operating model, growth prospects and cost structure and concentrating on e-commerce platforms. Management is also making incremental investments to catapult it into a product and services-driven enterprise. Service revenue now represents approximately 14% of the total sales.
The company is trying all means to give itself a complete makeover. This seems evident as demand for office products (paper-based) has been decreasing due to technological advancements. Smartphones, tablets and laptops are fast emerging as viable substitutes for paper-based office supplies. Further, stiff competition from online retailers such as Amazon AMZNand lower traffic count in retail stores have been playing spoilsport.
The reflection of the same is quite visible from this Zacks Rank #3 (Hold) stock’s performance in the bourses. In the past three months, shares of the company have nosedived 20.4%, wider than the industry’s decline of 1.1%.