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Office Depot Issues Profit Warning, Blames Hurricanes

By Reuters
Published | Updated

CHICAGO – Office Depot Inc. (ODP) Tuesday warned that profit for the rest of the year would fall short of forecasts because of the string of hurricanes in Florida and poor sales elsewhere, sending its stock down 6.5 percent.

The No. 2 U.S. office supply chain, headquartered in Delray Beach, Fla., said it now expects a third-quarter profit between 26 cents and 28 cents a share, below the 33 cents seen by analysts polled by Reuters Estimates.

For the full year, it projected earnings between $1.08 and $1.14 a share, compared with a Reuters Estimate average forecast of $1.22 a share. tial investor conference, saying that the Florida hurricanes would not materially affect its quarterly results, and back-to-school demand had been good so far.

"Therefore, we believe that Office Depot suffers from executional issues, and not necessarily a weak economic environment," he said in a research note.

He kept a "neutral" rating on the stock but lowered his price target to $17 from $19 per share.

Office Depot said its headquarters were closed for four business days because of recent hurricanes that ravaged Florida, and it lost sales in regions affected by the storms. The retailer expects more disruption as Hurricane Ivan (search) heads for the southern U.S. coast.

In all, storm-related costs and lost sales were expected to trim 1 cent to 2 cents per share from earnings.

Office Depot said European sales were well below expectations in August, and the Guilbert business that it acquired last year was not generating the revenue growth that the company had hoped it would.

Back-to-school sales in North America were also below expectations, and the retailer now expects third-quarter sales at stores open at least a year to be flat to up slightly.

Office Depot expects some improvement in the fourth quarter, but results will fall short of high-single digit growth projections.

Shares of Office Depot were off $1.05, or 6.5 percent, at $15.15, making it one of the day's biggest percentage decliners on the New York Stock Exchange (search).