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Specialty Retail

Specialty Retail. By Leah Constan-Tatos. Inventory Method. Inventories stated at lower of cost or market and reduced for inventory loss and obsolescence Weighted average is used to determine the cost of inventory  no adjustment

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Specialty Retail

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  1. Specialty Retail By Leah Constan-Tatos

  2. Inventory Method • Inventories stated at lower of cost or market and reduced for inventory loss and obsolescence • Weighted average is used to determine the cost of inventory  no adjustment • FIFO is used for inventory held within European countries

  3. Inventory Methods used by other companies in the industry • Staples – Weighted Average • Amazon – FIFO • United Stationers – LIFO

  4. Operating/Capital Leases • Retail stores • Facilities • Vehicles • Equipment • All operating leases are under fixed non-cancellable terms with at least one renewal option

  5. Because operating leases exist for ODP…. • Rent expense is reported in the income statement under SG&A • EPAT is lower because rent is an enterprise expense • EATO is higher because NEA is lower (lease not reported on B/S) • Financial leverage is enhanced because liabilities aren’t reported on the B/S • Current RNEA appears higher without capitalization of the operating leases, which boosts the company’s ROE

  6. Employee Stock Options – Exercisable Overhang

  7. Employee Stock Options – Outstanding Shares Overhang

  8. Stock-Based Compensation-ESOs 2012

  9. Options O/S at Dec. 28, 2013

  10. Stock-Based Compensation-ESOs 2013

  11. “In the Money” Options: • Stock Price at year end - $5.29 • Has a large number of “in the money” ESO’s outstanding • 55% of exercisable shares are definitely “in the money” (range $5.14-$10.00 not taken into consideration)

  12. ODP Historical Stock Prices 5.29 Avg. 4.38 3.46

  13. Share Based Comp. Calculations

  14. Adjustments

  15. Websites Accessed • IBIS World http://clients1.ibisworld.com.proxy.library.nd.edu/reports/us/industry/default.aspx?entid=1098 • Bloomberg - Office Depot Form 10-K, 2013 http://investing.businessweek.com/research/stocks/financials/secfilings.asp?ticker=ODP • Yahoo Finance http://finance.yahoo.com/q/in?s=ODP+Industry

  16. S&P Capital IQ http://www.netadvantage.standardandpoors.com.proxy.library.nd.edu/NASApp/NetAdvantage/cp/companyValuation.do • Nasdaqhttp://money.cnn.com/quote/forecast/forecast.html?symb=ODP • Kiplingerhttp://www.kiplinger.com/tool/business/T019-S000-kiplinger-s-economic-outlooks/ • Valuelinehttp://www.valueline.com/

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