Focusing on B2B, ODP Closes 73 Retail Stores; Sees 'Elongated' BTS Season

A disappointing back-to-school season has been “elongated,” said ODP CEO Gerry Smith on a quarterly call Thursday (see Q3 materials here). The former Office Depot expects sales that didn’t materialize in the traditional BTS season to stretch into Q4 and Q1, Smith said, hoping the 53% of students currently learning from home due to the COVID-19 pandemic will go back to the classroom in coming months and need supplies. ODP had a 9% Q3 revenue drop to $2.5 billion but e-commerce sales grew 20% as the company positioned itself as a source for home office and learn-from-home products during the pandemic. Revenue grew 18% sequentially, and operating performance was near pre-coronavirus levels, said Smith, crediting the company’s pivot to a business-to-business model and a growing e-commerce business. Chief Financial Officer Anthony Scaglione highlighted adjacent categories -- cleaning and breakroom, personal protective equipment, technology, furniture, and copy and print -- which comprised 47% of business solutions division revenue amid “improving business conditions.” Retail sales declined 3% to $1.1 billion, partly due to planned closures of 73 underperforming stores since Q3 2019 to “reduce retail liabilities." Retail remains important to the company, management said, citing positive results from its omnichannel sales approach: Buy online, pick up in store fulfillment rose 82%, said Scaglione. Smith downplayed the concern that tech and PPE sales were pulled forward into Q3 and that demand could slack off as normal routines return in 2021, saying ODP “is not just an office supply company.” Smith is “optimistic we’ll continue to have a multi-channel approach” and offer “broader and broader products and services.” Shares jumped 18.3% Thursday, closing at $24.90.