ODP Q1 2025 slides reveal improved performance trends as stock surges 21%

Introduction & Market Context

The ODP Corporation (NASDAQ:ODP) shares jumped 20.91% to $16.48 in early trading on May 7, 2025, after the office supplies retailer presented its first quarter 2025 financial results showing improved performance trends despite year-over-year revenue declines. The positive market reaction marks a significant reversal from the previous quarter when the stock plunged 19.2% following disappointing Q4 2024 results.

While overall revenue and operating income decreased compared to the same period last year, the company highlighted sequential improvements in comparable sales trends and a substantial increase in free cash flow generation. ODP also emphasized progress in its strategic pivot toward B2B services and expansion into the hospitality market.

Quarterly Performance Highlights

ODP reported first quarter 2025 sales of $1,699 million, down from $1,869 million in the same period last year. The company posted an operating loss of $32 million compared to an operating income of $41 million in Q1 2024. However, when adjusted for restructuring costs, adjusted operating income was $54 million, still below the prior year’s $66 million.

As shown in the comprehensive financial summary below, adjusted earnings per share came in at $1.06, compared to $1.31 in the first quarter of 2024:

A bright spot in the results was the significant improvement in cash flow. The company generated $57 million in operating cash flow from continuing operations, up from $44 million in Q1 2024. Adjusted free cash flow more than doubled year-over-year to $45 million from $17 million.

ODP’s retail division, Office Depot , showed signs of improvement with same-store sales trends up 500 basis points year-over-year. The division reported sales of $838 million, down 11% from $944 million in Q1 2024, reflecting 46 fewer stores in operation compared to the same period last year.

The following chart illustrates Office Depot’s performance metrics and the improvement in same-store sales:

Meanwhile, ODP Business Solutions, the company’s B2B segment, reported sales of $852 million, down from $926 million in Q1 2024. Operating income decreased to $21 million from $31 million. Management attributed the decline to a challenging business environment with macroeconomic factors constraining enterprise spending.

Veyer, ODP’s supply chain and logistics segment, also experienced a revenue decline to $1,152 million from $1,244 million in Q1 2024. However, the company highlighted strong growth in third-party customers, with revenue from these customers increasing 89% year-over-year to $17 million.

Strategic Initiatives

A key focus of ODP’s presentation was its "Optimize for Growth" plan, which aims to accelerate the company’s pivot toward B2B services while reducing its reliance on retail operations. The multi-year restructuring plan is expected to cost between $185-$230 million but deliver an estimated $380 million uplift in EBITDA and $1.3 billion in total value creation.

The following slide outlines the key components of this strategic initiative:

As part of its diversification strategy, ODP is expanding beyond office supplies into the hospitality market, which it estimates to be a $16 billion addressable market with growth potential. The company has signed its first partnership with a leading hotel management company featuring over 15,000 customer locations and established key supply agreements with Sobel Westex and Hunter Amenities.

The hospitality expansion strategy is illustrated in this slide:

Financial Position

ODP maintained a strong balance sheet at the end of Q1 2025, with total available liquidity of $653 million, including $185 million in cash and cash equivalents and $468 million available under its credit agreement. The company reported total debt of $262 million, making it net cash positive relative to its ABL balance.

The company’s prudent inventory and working capital management contributed to the improved cash flow performance, with capital expenditures of $21 million in the quarter primarily directed toward investments in the B2B platform.

Forward-Looking Statements

In its concluding remarks, ODP management expressed optimism about the company’s trajectory, highlighting improved year-over-year comparable trends, stronger adjusted free cash flow, and new business wins in the B2B segment. The company emphasized that it is making solid progress in its expansion into the hospitality sector while executing its "Optimize for Growth" restructuring plan.

Management also noted that the company’s solid balance sheet and liquidity position, combined with its cash-generating business model, provide flexibility for future growth initiatives.

The positive market reaction to ODP’s Q1 2025 results suggests investors are encouraged by the improved performance trends and strategic direction, despite ongoing challenges in the office supplies market. This marks a significant turnaround from the previous quarter’s disappointing results, indicating that the company’s restructuring efforts and diversification strategy may be gaining traction with investors.

Full presentation:

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