The ODP Corporation (NASDAQ:ODP) Q2 2023 Earnings Call Transcript

Anthony Scaglione: Yes. The only thing I would add on the college collections and party supplies in just launched, so early days, early indications from feedback from our customers that it’s a positive. They like to see those categories in our stores and us refreshing to see that expansion. But it’s early days, but we’re starting to see some really exciting things on the horizon as it relates to that expansion.

Gerry Smith: And one, we have a good relationship with Crayola. We launched much larger linear footage in the stores in some test markets. We did a putlog with our board a couple of weeks ago, and super excited by what our merchandising team, Lauren and team has done and what we have this huge opportunity to — and so far, it’s testing really well. And really from Crayola from zero to five, all the way through pre-school, all the way through more and more fine or supply at the lower end of the market for my college and above perspective. So when we get a chance to get down here, we’d love to show you that. But we’re really excited by some of that core opportunity expansion as well.

Jeff Lick: And just if I can on Veyer, the external goal, the longer-term goal, 2025, being $30 million of EBITDA as you sit here today, based on what you’re seeing in Q2’s results, which it seems like probably were incrementally better than you thought. I’m just curious — how are you feeling about that goal? And what would you specifically point to that seems to be going better than you thought?

Gerry Smith: Yes. I’m super proud of John and his team. I think that, for example, if you break it up from what we call vendor consolidation, which is actually, we’re delivering the product from the supplier to our distribution centers, and we can do that, obviously, a more cost effective than some of our partners can do. That business is up year-to-date more than it was the entire last year. So that’s gone well. Our backhaul, which is when the truck is empty, once we deliver something empty truck, that’s up 40% year-over-year. We have great logos across all those pieces. And the 3PL business, which is the core long-term piece is a number of exciting logos. And so we’re $5 million of our — into the target of, I think, is $8 million target.

So I’m super optimistic we’re going to smash that and I’m super optimistic once we smashed that, that we’re not going to give you a number yet, Jeff, I know you want, but I’m very optimistic of beating that $30 million target in three years. I have a much higher target on John Gannfors and his teams, go ahead on a consistent basis, and I’m excited with that business. And that’s — as you and I talked about with Tim and Anthony, that’s a multiple expansion opportunity. That’s a higher multiple business. We’re demonstrating that. I know it’s still small, but there’s some really good shade a greener that I’m super optimistic about.

Jeff Lick: And then last one on gross margin, Anthony. Year-over-year for the Q1 and Q2, you’re up 60 bps. There’s a variety of factors. Obviously, there’s a mix shift, Business Solutions, there is a lower gross margin then there will be Office Depot. I know last year, Q3, I think represents easiest compare for some of the supply chain issues. I think that’s the case. Can you just talk about how to think about gross margin for the year? Would you expect given that there’ll be a structural or a mathematical headwind with the mix shift. Will you expect gross margin to be up year-over-year in Q3 and Q4?