Office Depot Inc (NASDAQ:ODP) surprised investors with a larger-than-expected Q1 profit, pushing ODP shares up almost 10% in premarket trading this morning.
Operating income was $127 million and net income was $116 million, or 22 cents a share, according to a company announcement. Net income from continuing operations was $74 million, or 14 cents per share. Sales were $2.78 billion. Analysts had expected earnings of 12 cents a share on revenue of $2.71 billion
In the comparable quarter last year, Boca Raton, FL-based Office Depot reported operating income of $85 million and net income of $46 million, or 8 cents per share. Net income from continuing operations in 1Q 2016 was $62 million, or 11 cents per share.
The company continues to close U.S. stores, with a target of 75 locations to be shuttered this year. It has also sold off international operations, announcing in January the sale of its European division. The sale of its Australia and New Zealand operations was announced last month. A year ago, a federal judge blocked the proposed merger with rival Staples, Inc. (NASDAQ:SPLS).
“I am very pleased that we continued our positive momentum into the new year and delivered a strong earnings performance in the first quarter,” said Gerry Smith, chief executive officer of Office Depot. “The company completed its sale of South Korea in late April and also entered into a favorable agreement to sell the operations located in Australia and New Zealand. Going forward, our focus is on executing against our strategic initiatives to grow the North American business.”
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, and there has been persistent weakness in the office products sector.
As of yesterday’s market close, ODP stock had advanced almost 20% in the past three months.