8-K: ODP Corp. Q3 Sales Dip 9%, Adjusted EPS Jumps 61% Amid Merger

The ODP Corporation reported a 9% decline in third-quarter sales to $1.6 billion, but saw adjusted diluted EPS increase by 61% to $1.14, as it progresses towards a year-end merger with Atlas Holdings.

Summary

• Total reported sales for Q3 2025 were $1.6 billion, a 9% decrease compared to $1.78 billion in the prior year period.
• GAAP operating income was $34 million, down from $102 million in Q3 2024.
• Net income from continuing operations was $23 million, or $0.72 per diluted share, compared to $68 million, or $2.04 per diluted share, in Q3 2024.
• Adjusted operating income was $38 million, a decrease from $41 million in Q3 2024.
• Adjusted EBITDA remained flat at $62 million for both Q3 2025 and Q3 2024.
• Adjusted net income from continuing operations increased to $36 million, or $1.14 per diluted share, up from $24 million, or $0.71 per diluted share, in Q3 2024.
• Operating cash flow from continuing operations increased to $90 million from $81 million in the prior year period.
• Adjusted free cash flow rose to $89 million from $68 million in Q3 2024.
• The company had $730 million in total available liquidity, including $182 million in cash and cash equivalents, and total debt of $148 million as of September 27, 2025.
• The previously announced merger with an affiliate of Atlas Holdings is expected to close by year-end 2025, subject to regulatory and shareholder approvals.

Sentiment

Score: 6

Explanation: While GAAP sales and profitability declined, largely due to strategic restructuring and one-time items, adjusted EPS and cash flow metrics showed significant improvement. The company is actively managing its transition, including store closures and B2B expansion, and the pending merger provides a clear exit strategy for shareholders.

Positives

• Adjusted diluted earnings per share from continuing operations increased by 61% to $1.14, up from $0.71 in the prior year period.
• Adjusted EBITDA remained flat at $62 million, demonstrating resilience despite a 9% sales decline.
• Operating cash flow from continuing operations increased to $90 million, up from $81 million in Q3 2024, driven by operational discipline and prudent working capital management.
• Adjusted free cash flow rose by 30.9% to $89 million, compared to $68 million in Q3 2024.
• Veyer Division's sales from third-party customers increased by 64% to $23 million, generating $7 million in EBITDA.
• ODP Business Solutions Division improved year-over-year revenue trends by approximately 200 basis points, successfully onboarding over 600 new hotel properties and executing targeted sales initiatives.
• Office Depot Division's comparable store sales decline improved to 7% from a 10% decrease in the prior year period, and its operating income increased to $31 million from $23 million.
• The "Optimize for Growth" restructuring plan generated $13 million in restructuring income, primarily from a $17 million gain on the disposal of a distribution facility.

Negatives

• Total reported sales decreased by 9% to $1.6 billion compared to $1.78 billion in the prior year period.
• GAAP operating income significantly declined to $34 million from $102 million in Q3 2024.
• Net income from continuing operations decreased to $23 million from $68 million in Q3 2024.
• Diluted earnings per share from continuing operations fell to $0.72 from $2.04 in Q3 2024.
• The Office Depot Division's sales were down 13% year-over-year, impacted by 63 fewer retail locations, lower demand in certain product categories, and reduced online sales.
• The ODP Business Solutions Division experienced a 6% sales decline year-over-year, attributed to ongoing macroeconomic headwinds and softer enterprise customer spending.
• Store and online traffic for the Office Depot Division were lower year-over-year due to macroeconomic factors.

Risks

• Trends affecting the company's financial condition or results of operations.
• Ability to achieve strategic plans, including the benefits related to Optimize for Growth, Project Core, and other strategic restructurings or initiatives.
• Liquidity challenges.
• Disruptions or inefficiencies in the supply chain.
• Uncertainties arising from conflicts, including those in Russia-Ukraine and the Middle East.
• Macroeconomic drivers and their effect on the U.S. economy, such as higher interest rates that materially impact consumer spending and employment, and the demand for products and services.
• Changes in trade policy and tariffs.
• The outcome of contingencies such as litigation and investigations.

Future Outlook

The company expects its previously announced merger with an affiliate of Atlas Holdings to be completed by year-end 2025, subject to customary closing conditions including regulatory and shareholder approvals. Due to the pending merger, the company will not hold an earnings conference call or provide forward-looking guidance. The "Optimize for Growth" restructuring plan is expected to generate approximately $380 million in EBITDA improvement and over $1.3 billion in total value over its multi-year life.

Management Comments

• The company is focused on advancing its "Optimize for Growth" restructuring plan to reduce fixed-cost infrastructure and leverage core strengths for accelerating growth in B2B market segments.
• Management is prioritizing capital investments towards B2B growth opportunities, supporting supply chain operations, distribution network, and digital capabilities.
• The company is making meaningful progress on potential new agreements with several leading hospitality management companies, expanding its presence in new markets.
• Operational discipline, including strong cash conversion and prudent working capital management, is helping to offset the impact of lower sales.

Industry Context

The company's results reflect ongoing macroeconomic headwinds and softer enterprise customer spending, which impacted sales in both its consumer (Office Depot) and business-to-business (ODP Business Solutions) divisions. Despite these challenges, the company is actively pursuing growth in new enterprise verticals like hospitality and healthcare, aligning with a broader industry trend of diversification and B2B focus for traditional retail-centric businesses. The decline in retail traffic and store closures are consistent with long-term trends in the office supply retail sector.

Comparison to Industry Standards

• NA

Stakeholder Impact

• Shareholders: The pending merger with Atlas Holdings is a significant event, offering a potential liquidity event and a defined valuation for their shares. The mixed Q3 results (GAAP decline vs. adjusted growth) provide a complex picture ahead of this transaction.
• Employees: The "Optimize for Growth" restructuring plan involves store and facility closures (12 retail stores, 15 satellite locations, one distribution facility in Q3 2025), which likely impacts employment in those areas.
• Customers: Office Depot customers may experience fewer retail locations. ODP Business Solutions customers, particularly in the hospitality sector, are seeing expanded services and new customer onboarding.
• Creditors: The company maintains strong liquidity ($730 million) and manageable debt ($148 million), suggesting a stable position for creditors.

Next Steps

• Complete the merger with an affiliate of Atlas Holdings by year-end 2025, subject to regulatory approvals and shareholder approval.
• Continue to advance the "Optimize for Growth" restructuring plan, focusing on reducing fixed-cost infrastructure and accelerating growth in B2B market segments.
• Expand into new enterprise verticals such as hospitality, healthcare, and other adjacent sectors.
• Execute targeted sales initiatives and generate incremental growth in the hospitality sector.
• Pursue potential new agreements with leading hospitality management companies.

Key Dates

Recommendation

The company is in a transitional phase with a pending acquisition by Atlas Holdings expected by year-end 2025. While GAAP financial metrics show declines, largely influenced by strategic restructuring and one-time items, adjusted earnings per share and cash flow metrics demonstrate underlying operational improvements. The "Optimize for Growth" plan is progressing, aiming for long-term value creation. Given the imminent merger, the stock's future price is largely tied to the acquisition terms and successful completion, rather than immediate operational performance. Therefore, a "hold" recommendation is appropriate for investors awaiting the merger's finalization.

Keywords

Office supplies, Business solutions, Retail, E-commerce, Supply chain, Distribution, B2B, Office Depot, Veyer, Atlas Holdings, Merger, Financial results, Earnings, Q3 2025, Adjusted EPS, Operating cash flow, Restructuring