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Office Depot Profit Rises, but Sales Disappoint

Office Depot, the world's No. 2 office-supplies retailer, said on Wednesday its quarterly profit rose 27%, but its sales fell short of Wall Street's expectations and its shares dropped Wednesday.

The company said fourth-quarter net income rose to $135 million, or 48 cents a share, from $106 million, or 34 cents a share, a year earlier.

Excluding special items, Office Depot said it saw a profit of 54 cents a share for the quarter. On that basis, analysts were expecting the company to post earnings of 52 cents a share, according to Reuters Estimates.

"The bottom line is that the quarter was not a disaster, but not very solid either," Credit Suisse analyst Gary Balter said in a research note.

Chief Executive "Steve Odland and his team have done a tremendous job leading the turnaround efforts to date," said Balter, who has a "neutral" rating on Office Depot's stock.

Sanford Bernstein analyst Colin McGranahan called it "a messy fourth-quarter as one-time charges and gains clouded the results. Adjusted for these nonrecurring events, however, fourth-quarter results appeared to be moderately ahead of consensus expectations," wrote McGranahan, who has an "outperform" rating on Office Depot's shares.

Sales rose 4% to $3.84 billion from $3.72 billion, but were slightly below expectations of $3.89 billion. Sales at stores in North America open at least a year rose 1%.

Looking to India

To continue to grow sales, Office Depot will be looking to expand into India and South America, CEO Steve Odland told "Squawk Box," describing the Indian market as a "big hole for us."

In addition, the company plans to open 150 stores in North America this year and 200 next year, Odland said.

Odland also did not rule out the possibility of an acquisition in the U.S., saying the business is still fragmented and there is room for consolidation.

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Office Depot said it opened 39 stores during the quarter and remodeled 63. The retailer has been closing and remodeling stores, and expanding its private-label merchandise business as it tries to better compete with industry leader Staples Inc.

Office Depot's stock trades at 19.54 times 2007 earnings, a discount to rivals Staples and OfficeMax, which trade at 21.02 and 26.5, respectively.

Its shares have fallen about 22% from their 52-week high of $46.52 reached May 11.

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