UPDATE: Office Depot Halts Same-Store-Sales Decline

Office-Depot Inc. (ODP) said its comparable-store sales in the U.S. and Canada didn't sink in its third quarter, which is the best performance at the office-supply chain in four years.

On Wednesday, less than a week after announcing a $1 million settlement with the Securities and Exchange Commission to clear up alleged fair-disclosure and accounting violations, Office Depot reported results in line with the expectations it announced Monday when it revealed that the company and its chief executive agreed to part ways. Steve Odland, also Office Depot chairman, agreed to pay an additional $50,000 to the SEC for his role in the disclosure violations, as did its former chief financial officer. The company's choice for interim chairman and CEO, longtime director Neil Austrian, said in a Wednesday conference call that Odland's departure was completely unrelated to the SEC settlement.

"There is no good time" to replace a CEO, Austrian said, and Monday was "as good a time as any," as Office Depot sees some signs the economy has bottomed and needs now to turn its attention to increasing its sales and addressing a store base he termed aging and too large. The SEC took issue with accounting issues beginning in 2006 and the way Odland and the former CEO tacitly guided analysts and its largest investors to lower earnings views in 2007, the year the agency's investigation began.

Office Depot posted a small profit even without a large tax and interest-expense benefit. It was better than the modest loss analysts had expected, even though revenue lagged Wall Street views slightly.

Business in California, which had been an outsized drag on the company due to the high concentration of stores there, finally started to show improvement, doing better than it had in "at least three years," Austrian said.

The company also said that its Mexico business is expanding in Mexico and other countries through an acquisition, and it is working toward selling its operations in Israel to a large Israeli retailer.

Office Depot shares were off 2.5% recently at $4.65, while rival OfficeMax Inc. (OMX), which reports its most-recent results on Thursday, was down 3.1% at $14.82 and industry titan Staples Inc. (SPLS) was down 1.7% at $20.22 a share. Office Depot stock is down more about 26% this year.

-By Maxwell Murphy, Dow Jones Newswires; 212-416-2171; maxwell.murphy@dowjones.com

(Tess Stynes contributed to this article.)

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