The ODP Corporation (NASDAQ:ODP) Q3 2023 Earnings Call Transcript

It was just a little bit softer in Q3 compared to prior year. And we saw heightened demand during the pandemic, but I think we’re at more of a normal and we’ve been at a normalized level of furniture and workspaces this year. And then the last one, cleaning and breakroom, clearly that had to spike in during the COVID time period. But that’s an area where we still see opportunities for growth, and it’s a growth end market as well. So those are why we’re leaning into those adjacency categories, because we see ultimately those adjacency categories being growth drivers for the business.

Gregory Burns: All right. Thank you.

Anthony Scaglione: Thanks, Greg.

Operator: Thank you. One moment for our last question, please. It comes from the line of Joe Gomes. Mr. Gomes, please state your company name and proceed with your question.

Joe Gomes: Congrats on the quarter. It’s Joe Gomes with Noble Capital.

Anthony Scaglione: Hey, Joe.

Joe Gomes: So the first question, Anthony, you mentioned a couple of times about the slowness of onboarding some of the new clients there in Business Solutions. I just wondering, you give us a little more detail. Is that specific to Office Depot? Is that due to your – ODP, or is that due to the clients just taking longer? Just a little more clarity there, please.

Anthony Scaglione: It’s mostly client-driven. And, again, I want to qualify, these are large-scale wins, conversions from an incumbent take time. And as you can imagine, the incumbent does everything possible to hold onto this contract as long as they can. Something that we do if we lose a contract. So some of this is normal. But what we expected some of these large wins to start in Q4, it looks like they’re going to start later in the quarter or early Q1, which is impacting some of ODP Business Solutions results for the balance of this year. But, overall, like I mentioned, we continue to have extremely good opportunities ahead of us. Our pipeline continues to be extremely strong. We’re winning close to 100% of our renewals.

And I think it goes back to from an enterprise perspective, we are coming in with a balance sheet that’s strong. We can work with our customers around what they want to achieve, both from a delivery perspective, a service perspective, a cost perspective. And, I think that’s going to afford us opportunities as we think about 2024 and beyond, when we look at the competitive landscape. Being the position that we are in and the position we’ve been able to manage from a balance sheet standpoint, give a lot of credit to the team. But I think that’s an area that we will be able to drive profitable growth over time.

Joe Gomes: Okay. Thanks for that. And on the retail stores, you mentioned some soft as a consumer traffic. Are you guys doing anything different to try and help improve retail traffic either at the stores or online? And similarly, last quarter you had started the college collections and party supplies. Just wondering one quarter in how that was accepted.

Anthony Scaglione: Yes, on the latter point, the college supplies early days, but we saw positivity. It was just very small. We wanted to test and learn versus doing a full blown from an inventory management and also from a staging perspective across our 900 plus stores. As you can imagine, we wanted to make sure that we’re making the right incremental investments in those categories and they resonated well, but small from an overall contribution standpoint. As you think about the things we’re doing to grow traffic, one is TSA. We’ve launched that, that’s well underway. We expect to be fully across. I think it’s about 500 stores sometime middle of next year. That’s going to be a traffic driver. We’re looking at other areas within the travel.