Bright and early this morning, Office Depot (NYSE: ODP) announced that the global recession led to a fiscal first-quarter loss of 20 cents per share, down from a profit of 25 cents per share last year.
The office supply retailer stated that demand for office supplies, namely computers and other big-ticket items, dropped thanks to the economic slowdown. Taking charges out of the equation, ODP earned 10 cents per share, which was better than the estimated loss of 9 cents per share. This positive surprise pushed ODP shares higher in pre-market trading.
American sales dropped 16% to $1.44 billion, with same-store sales falling 17%. ODP attributed this sales pitfall to small businesses reducing spending in tough economic times. The company was also less aggressive with its advertising in certain categories, which cut into ODP's quarterly sales. ODP also announced that it is looking for "other internal sources of liquidity," aside from its lowered inventory and job cuts. One possibility is sale leasebacks of properties ODP owns in Europe and the U.S.
One thing is certain, ODP stock needs a major boost. Currently, the shares are trading slightly above the $1 level. While this morning's news has boosted pre-market trade, the push higher will have to be massive if the equity is going to advance. ODP's 10-month moving average looms overhead in the upper reaches of the $4 region. In order to topple this resistance, ODP would have to stage a massive rally -- which is rather hard for a "penny stock" to pull off.
One thing is certain, ODP stock needs a major boost. Currently, the shares are trading slightly above the $1 level. While this morning's news has boosted pre-market trade, the push higher will have to be massive if the equity is going to advance. ODP's 10-month moving average looms overhead in the upper reaches of the $4 region. In order to topple this resistance, ODP would have to stage a massive rally -- which is rather hard for a "penny stock" to pull off.
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