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Office Depot's net sales dropped 12% year over year in Q2, amid lower demand and online sales, as well as store closures.

In its just-released Q2 earnings, Office Depot’s owner the ODP Corporation posted a net sales drop of 10% from the same period last year. It cited a challenging macroeconomic environment. During the same quarter, Office Depot’s sales were down 12% year over year.

Office Depot is No. 21 in the Top 1000, Digital Commerce 360’s database of the largest North American online retailers by annual web sales. In the Top 1000, Office Depot falls under the Office Supplies category. Digital Commerce 360 projects that Office Depot’s web sales will reach $5.13 billion in 2024.

Office Depot web sales by year

Results for Office Depot, Q2 earnings for ODP Corporation

ODP Corporation CEO Gerry Smith addressed the lower earnings head-on.

“We are disappointed in this performance and view this as unacceptable,” Smith said during the company’s earnings call. “We have faced ongoing macroeconomic headwinds in a challenging business environment, which reduced the level of corporate and personal spending, impacting our ability to gain top-line traction back to the level we were expecting.”

The challenging macro environment included sluggish electronics and office supplies sales. Those factors, he said, pushed numbers down at Office Depot stores and in the company’s B2B unit, ODP Business Solutions. In addition, the company cited planned store closures, which resulted in 58 fewer retail outlets over the past year. Meanwhile, it saw a decrease in online sales as well.

Some key numbers from the report highlight the challenges ODP has faced.

  • 9 Office Depot store closures during the past quarter, resulting in 894 open stores at Q2’s end.
  • Sales decreased 7% on a comparable store basis.
  • Office Depot sales down 12% to $799 million.
  • ODP Business Solutions sales down 8% to $917 million.
  • Updated fiscal year 2024 guidance: Sales of at least $7 billion.

Hope that Project Core will deliver savings

Smith touted Project Core as one of the key factors in achieving what the company believes will be a turnaround. He believes that will be achievable in the year ahead.

“It is being achieved through cost efficiency measures across the entire enterprise, including our organizational structure, supply chain, and cost of goods sold savings through further efficiencies,” Smith said, adding that the company has also embarked on and implemented business processes and AI transformation that will position it to generate significant growth and savings in the future.

Fates of Veyer and Varis

While ODP is best known for its flagship public-facing Office Depot stores that sell everything from copier paper to swivel chairs, the company has stakes in B2B solutions and the supply chain, which delivered mixed results.

A wrinkle in the company’s 2024 outlook is its plans to sell Varis, a unit that matches buyers and suppliers in a marketplace-type format. The company launched Varis in 2021, but the separate unit failed to gain traction.

Smith addressed the fate of Varis in the call.

“We have entered into a nonbinding term sheet with a third party for the sale of Varis, retaining an approximately 20% current stake in the entity,” Smith said, adding that further details of the transaction will be provided upon closing, which is expected in Q3.

Meanwhile, Veyer — a supply chain solutions company that ODP owns — delivers solid results for ODP.

“Veyer continues to make strong progress, efficiently providing service for its internal customers while continuing to grow its business with third-party customers,” Smith said.

Moreover, Smith said he anticipated an additional boost to Veyer’s performance from a deal reached just before the Aug. 8 earnings call

“From a Veyer perspective, we have a verbal agreement that was just awarded literally about 30 minutes to 40 minutes ago that will — out of the gate, has the potential to almost double the Veyer top line from the prior year,” he explained. “So I’ll say that again, so everyone hears that this is a trajectory pivot for the business overall and for Veyer. But we’ve signed a deal — a verbal deal — with a large ecommerce company for a warehouse- and supply chain-providing deal that, again, has the potential to be almost double the previous year’s revenue level, which is very, very significant.”

He expects the deal to be implemented sometime during Q3.

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