Office Depot sees FY17 revenue lower than FY16, consensus $10.29B
Office Depot continues to expect total company sales in 2017 to be lower than 2016, primarily due to the impact of planned store closures, prior year contract customer losses, continued challenging market conditions and returning to a 52-week fiscal year. However, the company expects the rate of sales decline to improve in the second half of 2017 based on improvements in customer retention, implementation of new customer wins and growth from strategic business initiatives. The company expects to be substantially complete with the OfficeMax integration and realize the majority of the synergy benefits by the end of 2017. Merger integration expenses are now estimated to total approximately $40 million in 2017 and approximately $15 million in merger-related capital expenditures. Office Depot's additional cost saving initiatives are expected to deliver over $250 million in annual benefits by the end of 2018. About half of these benefits are anticipated to be realized in 2017. In addition, the company estimates it will incur up to approximately $125 million in costs to implement the cost saving programs, of which $75 million has been incurred in 2016 and through the first half of 2017. The majority of the remaining costs are expected to be incurred by the end of 2017. The company continues to expect adjusted operating income of approximately $500 million in fiscal 2017. This includes funding a number of strategic initiatives and opportunities to grow the business throughout the year. The 2017 target is a comparable year-over-year increase of about 10%, excluding the $15 million estimated 53rd week operating income benefit realized in 2016. Capital expenditures in 2017 are now expected to be approximately $150 million including investments to support the company's critical priorities and the Store of the Future test formats. Depreciation and amortization is expected to be approximately $150 million in 2017. Office Depot continues to anticipate free cash flow(3) from continuing operations to be more than $300 million in 2017. The company anticipates a non-GAAP effective tax rate of approximately 41% in fiscal 2017, dependent on the mix and timing of income. As the company continues to utilize available tax operating loss carry forwards and credits, the estimated cash tax rate is expected to be approximately 15%.