Office Depot Dogged by Economic Woes

Updated from 12:05 p.m. EDT

Office Depot(ODP Quote) said Thursday that a soft economy and weak housing market has put pressure on its core small-business customers, contributing to its 8% decline in second-quarter profits and likely weighing on earnings in the near future.

Shares of the retailer were sliding $1.94, or 6.7%, to $27.01 in recent trading.

The Delray Beach, Fla.-based company reported a net income of $109.1 million, or 40 cents a share, down from $118.3 million, or 41 cents a share, a year earlier.

Excluding certain charges, the office-supply company earned 43 cents per share in the second quarter, flat with the year-ago results on a comparable basis. The earnings met the average estimate of analysts surveyed by Thomson Financial.

Sales rose 4% to $3.63 from $3.49 billion, missing analysts' target of $3.69 billion.

North American retail sales for the company rose 1%, while international sales increased 14% in U.S. dollars and 7% in local currencies, fueled by strong growth in Europe. But same-store sales, or sales at stores open at least a year, dropped 5% in North America.

Chief Executive Steve Odland said that while he is pleased with the long-term growth prospects for Office Depot, he is less bullish amid the current economic uncertainty.

"Our comps have not improved since the second quarter ended and it will be difficult to show earnings per share growth until the macro situation allows sales growth again," he said.

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