Shares of Office Depot (OPD) tumbled 15.4% to $3.19 Thursday after the office supplies retail chain warned of disappointing first-quarter revenue and operating income due to a lower-than-expected performance at its CompuCom division.
The Boca Raton, Florida-based company said it expects revenue to total about $2.76 billion and adjusted operating income of about $65 million, including a $15 million operating loss for CompuCom. Analysts were calling for revenue of $2.82 billion. The shortfall is being driven primarily by lower-than-expected revenue from existing customer projects, the company said, worsened by a disproportionate reduction in expenses.
Office Depot said it was taking several steps to improve the division's performance, include streamlining its operational structure, reorganizing its customer-facing organization,and realigning the sales team to more effectively identify new opportunities.
"CompuCom's operating performance was clearly disappointing and the actions we are taking to improve its operations and sales performance are expected to yield improving results in 2019," CEO Gerry Smith said in a statement.
Office Depot said its business solutions division was hit by paper and paper-related cost increases that could not be completely passed through to customers due to the timing of contractual limitations. Paper costs have increased more than 20% during the year, and the company is pursuing several initiatives to mitigate the impact of such cost increases.
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