30 July 2007 — New York (NY): Citigroup analysts believe that Office Depot’s EPS growth during the second half of the year will remain relatively flat.
The analysts suggest this will be caused by decreased spending by the small to medium business customer affecting both Depot’s North America Retail and Business Solutions sales.
Citigroup also forecasts that retail gross margins will likely be pressured by a more promotional back-to-school season, while international operating margins will likely be pressured as Depot continues to invest heavily for future growth.
However, aggressive cost cutting initiatives, continued strength in large business and government spending, progress in regaining customer accounts following the integration of Allied Office Supply and ongoing solid double-digit growth of the top line in the international business could all help to offset these pressures.
Last week Depot reported Q2 net earnings on a GAAP basis of $109 million, compared to $118 million a year earlier.