Zane Brock

Zane Brock inquired about the sustainability of domestic same-store sales momentum as comparisons become more challenging in Q3 and Q4, especially with higher inflation being lapped. He also asked about the expected gap between sales and SG&A growth and the model's reliance on gross margin to achieve 19%+ operating margins.

Answer

President and CEO Philip Daniele III expects domestic same-store sales to remain relatively stable, potentially moderating slightly, but is confident in continued market share gains. CFO Jamere Jackson explained that SG&A growth will slightly outpace sales during the investment phase, aligning with sales growth as stores mature. He added that the current GAAP operating profit, when adjusted for accelerated growth investments and LIFO charges, aligns with a 20% operating model on a larger store base.

Zane Brock, on for Michael Lasser, asked about ODP's growth and market share expectations for the core B2B office supplies market in the coming year. He also questioned whether B2B growth benefits would fully offset the expected deterioration in the B2C segment, the minimum required CapEx for the B2C business, and the company's exposure to the Federal Government.

Answer

CEO Gerry Smith responded that the traditional office supply sector is experiencing macro declines and is highly fragmented, making market share difficult to gauge. He expressed confidence that growth in new segments like hospitality and 3PL is expected to offset the optimization of the retail business over time. Smith also clarified that the company's exposure to the Federal Government is not significant and does not have a huge impact on the business.