Office Depot Sees Sales Gains On Strength Of Growing IT Business

Office Depot CEO Gerry Smith said the company is expanding its IT services, and device-as-a-service offerings as CompuCom as well as other business services helped drive 11 percent year-over-year growth in second-quarter sales.

’We have scaled our tech services to be more relevant to SMBs, including the launch of our device-managed service contracts for small business and a new IT-as-a-service offering for businesses from 1 to 250 employees that was recently rolled out,’ Smith told investors during an earnings call Tuesday. ’This offering is perfect for customers who need an IT advisor and want to optimize their IT spend with centralized support. Importantly, it is built around a monthly, per-user subscription model.’

The move pushes the office supply retailer deeper into solution provider territory, with Smith adding that the company’s sales force has been incentivized to cross sell technology solutions to hundreds of existing office supply customers. Without naming the business, Smith said Office Depot sales flipped a ’modest-sized’ traditional office supply customer into an IT customer with a ’multimillion dollar IT relationship.’

’Overall, I’m pleased with our progress integrating our CompuCom offerings into our broader services portfolio,’ Smith said. ’CompuCom is an important strategic asset for us as a company, and provides us with unique capabilities that truly differentiates us from the competition, and positions us for additional opportunities that we could not pursue without them.’

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Office Depot generated $2.63 billion in revenue in its second quarter, up from the $2.36 billion it posted in the year ago quarter. Analysts had expected sales of $2.58 billion. Net income came in at $16 million for the quarter ending June 30, down from $24 million in the second quarter of 2017. Office Depot's stock shot up 20 percent on Tuesday, trading at $3.04.

Services revenue -- driven primarily by the company’s purchase of CompuCom in October 2017 -- came in at $432 million, up 120 percent from the year ago quarter, prior to the acquisition. However, Smith said CompuCom is performing better under Office Depot.

’CompuCom's large account wins in the first half of 2018 have far exceeded the full-year total from last year, I’m really pleased with that,’ he said. ’We will continue to drive services revenue in this business. We’ve now experienced four quarters of year-over-year growth in service orders. We are going to continue to make investments in order to capitalize on what we believe is a significant growth opportunity for this business.’

Office Depot said that CompuCom reported sales of $277 million this quarter versus $269 million last year prior to the acquisition.

Conversely, the company’s retail side -- which closed two stores over the quarter -- posted $1.1 billion is sales off 5 percent versus the same quarter in 2017. The company now has a total of 1,374 stores.