The Business Solutions division attributes a drop in contract sales to customers lost during the attempted acquisition of Staples last year.

It was a down first quarter for Office Depot Inc. as the office supplies company logged declines in business-to-business, retail and overall sales.

B2B sales in its Business Solutions division were $1.315 billion, down 3.9% from $1.368 billion in Q1 of 2016. “The sales decline was driven by the contract channel, while sales in the direct channel were approximately flat to the prior year,” chief financial officer Stephen Hare said on Office Depot’s earnings call with analysts last week.

Office Depot says direct channel sales mostly come from small and mid-sized business customers placing orders online, through catalogs or by phone.

“The sales decline in the contract channel was primarily driven by the impact of customer attrition during the period of business disruption related to the acquisition attempt last year,” Hare said on the call, according to a transcript from Seeking Alpha. In May 2016 the U.S. District Court for the District of Columbia granted the Federal Trade Commission’s request for a preliminary injunction against Staples Inc.’s proposed acquisition of Office Depot, effectively blocking the sale.

In the Business Solutions and Retail sales divisions’ direct channels, online sales increased but were offset by the ongoing reduction in catalog sales through its call centers, the company said in a statement. Office Depot doesn’t break out e-commerce sales in its business or retail divisions in its earnings reports and declined to provide online sales, but the 2017 B2B E-Commerce 300 estimates online B2B sales accounted for 21% of total sales.

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Business Solutions, or BSD, sales “decreased versus the prior year across most of our product categories, but we continue to achieve positive sales growth in copy and print and in our cleaning and breakroom category,” Hare said. “First quarter sales in the U. S. contract channel also increased again in our K-12 education customer group compared to the same period last year.”

For the first quarter of fiscal 2017 ended April 1, Office Depot, No. 42 in the 2017 B2B E-Commerce 300, reported:

  • Total sales of $2.676 billion, down 7.0% from $2.876 billion in Q1 2016.
  • Net income of $116 million, compared with net income of $46 million in the same quarter last year.

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