The ODP Corp (ODP, Financial) released its 8-K filing on February 28, 2024, detailing its fourth quarter and full year 2023 financial results. The company, a leading provider of business services and supplies, products, and digital workplace technology solutions, faced a challenging macroeconomic environment, resulting in a revenue decline. Despite this, ODP's disciplined capital allocation and low-cost business model enabled solid operating performance and strong adjusted earnings per share (EPS) growth.
Company Overview
The ODP Corp operates through multiple segments, with the Veyer Division being the largest revenue contributor. This division specializes in B2B and consumer business service delivery, leveraging its core competencies in distribution, fulfillment, transportation, global sourcing, and purchasing.
Financial Performance and Challenges
For the fourth quarter of 2023, ODP reported total sales of $1.8 billion, a 14% decrease compared to the previous year, attributed largely to lower sales in the Office Depot consumer division. This was due in part to 64 fewer retail locations and reduced retail and online consumer traffic. The company also faced a GAAP operating loss of $31 million, including non-cash asset impairment charges of $68 million related to goodwill at Varis.
For the full year, ODP's total reported sales were $7.8 billion, down from $8.5 billion in the prior year. However, the company achieved an adjusted operating income of $290 million and an adjusted net income from continuing operations of $223 million, translating to an adjusted diluted EPS of $5.60, an increase from $4.40 in the previous year.
Operating cash flow from continuing operations was $331 million, and the company generated a robust free cash flow of $224 million, up from $138 million in the previous year. This strong cash flow performance supported the repurchase of nearly $300 million in shares through the share repurchase program during 2023.
Strategic Initiatives and Shareholder Returns
ODP's CEO, Gerry Smith, highlighted the company's commitment to its low-cost business model and capital allocation strategy, which has been instrumental in driving strong financial results. The company announced "Project Core," an enterprise-wide program aimed at streamlining operations and enhancing focus on the core business, which is expected to generate annualized savings of $50 million to $60 million when fully implemented.
"We’re excited about the future and confident in our position of strength, as we focus on continuing to drive our low-cost business model, leveraging our multiple routes to market, and remaining disciplined with our capital allocation plan," said Smith.
In line with this initiative, ODP has approved a new $1 billion share repurchase authorization, replacing the prior authorization and signaling a strong commitment to enhancing shareholder value.
Looking Ahead: 2024 Guidance
For 2024, ODP anticipates a sales decline of 2% to 5%, with adjusted EBITDA expected to be between $410 million and $430 million. The adjusted EPS is projected to be between $5.60 and $5.80 per share, with adjusted free cash flow expected to be greater than $200 million.
ODP's management remains cautiously optimistic about the macroeconomic environment and is focused on executing its strategic plans, including the continuation of the low-cost business model approach through "Project Core."
For more detailed information on The ODP Corp's financial performance and strategic initiatives, investors and stakeholders are encouraged to review the full 8-K filing.
Explore the complete 8-K earnings release (here) from The ODP Corp for further details.
