The ODP Corp (ODP) Reports Mixed Q3 Results Amid Economic Challenges
Third-quarter revenue declined by 8% year-over-year to $2 billion, with a notable decrease in consumer division sales.
GAAP EPS increased to $1.79 from $1.36, while adjusted EPS rose to $1.88 from $1.48 in the prior year.
ODP's share repurchase program continued with $32 million of shares bought back in Q3 2023.
Full-year 2023 guidance updated, with sales projections revised to $7.8 - $7.9 billion and adjusted EPS increased to $5.30 - $5.60 per share.
The ODP Corporation (NASDAQ:ODP), a leading provider of business solutions, announced its third-quarter earnings on November 8, 2023, revealing a mix of challenges and financial resilience. The company reported a decline in sales but demonstrated strong earnings per share (EPS) growth, reflecting its low-cost business model and disciplined capital allocation.
Fiscal Summary and Performance Overview
For the quarter ended September 30, 2023, The ODP Corp reported total sales of $2.009 billion, an 8% decrease from the $2.172 billion reported in the same period last year. The decline was primarily attributed to the Office Depot consumer division, which saw a reduction in retail locations and lower consumer traffic. Despite the sales dip, The ODP Corp achieved a GAAP operating income of $91 million, up from $84 million in Q3 2022, and a GAAP net income of $70 million, resulting in a GAAP EPS of $1.79, a significant increase from $1.36 per diluted share in the prior year.
Adjusted Financial Highlights
The company's adjusted operating income remained flat at $95 million, while adjusted EBITDA decreased slightly to $125 million from $131 million in Q3 2022. Adjusted net income from continuing operations held steady at $73 million, but on a per-share basis, adjusted diluted EPS from continuing operations saw a notable increase of 27% to $1.88, up from $1.48 in the previous year.
Capital Allocation and Share Repurchase
The ODP Corp continued its share repurchase program, buying back 659 thousand shares at a cost of $32 million during the third quarter. The company's total available liquidity stood at $1.2 billion, including $384 million in cash and cash equivalents.
Divisional Performance
The ODP Business Solutions Division reported sales of $1 billion, a slight decrease from the previous year, mainly due to lower technology product sales. However, operating income for this division increased by 17% to $56 million. The Office Depot Division saw a 12% sales decrease, largely due to store closures and lower demand, with operating income at $66 million. Veyer Division's operating income rose to $10 million, and Varis Division reported an operating loss of $17 million, consistent with the prior year.
Guidance Update and Management Commentary
The ODP Corp updated its full-year 2023 guidance, revising sales expectations to $7.8 - $7.9 billion and increasing adjusted EPS guidance to $5.30 - $5.60 per share. The company's chairman, Joseph Vassalluzzo, expressed confidence in the company's ability to navigate a challenging macroeconomic environment and continue delivering shareholder value.
Chief Financial Officer Anthony Scaglione highlighted the company's strong cash flow generation and disciplined cost management, which positions The ODP Corp to maintain robust operating results as the year concludes.
For more detailed information on The ODP Corporation's third-quarter financial results and updated guidance, please visit the Investor Relations section of The ODP Corporation's website.
The ODP Corporation will host a webcast for financial analysts and investors on November 8, 2023, at 9:00 am Eastern Time to discuss the earnings report and future outlook.
Explore the complete 8-K earnings release (here) from The ODP Corp for further details.
This article first appeared on GuruFocus.
