Office Depot shares fall 14% after delay of earnings report

Office Depot Inc. on Monday delayed its third-quarter earnings report because of its audit committee’s independent review of vendor program funds -- a development that one analyst said raised questions about the nation’s second-largest office supplies retailer’s financial statements.

Its shares fell more than 14%.

The review relates mainly to the timing of the recognition of certain funds, the Delray Beach, Fla.-based company said. Office Depot had been scheduled to release its third-quarter results today; a new date wasn’t released.

Specifics of the delay and the funds were not clear. An Office Depot spokesman declined to comment.

Shares of Office Depot dropped $2.86, or 14.1%, to close at $17.43.

“While the scope and specific drivers of the issues are unclear, the presence of any investigation with the involvement of the board suggests questions about the integrity of the company’s financial statements and, as such, renders the valuation process challenging,” Goldman Sachs retail analyst Matthew Fassler wrote in a report.

Although it was premature to say there were any “untoward practices” to attribute to any individual, the analyst expects “high sensitivity to this issue given the significant margin expansion noted in the early portion of Steve Odland’s tenure,” the report said.

Odland was named chairman and chief executive in March 2005.

Lehman Bros. analyst Brad Thomas stressed that it was too early to tell how this would affect Office Depot, but he said delays related to the reporting of vendor funds occur rather often in the retail industry. Suppliers enter into agreements with retailers for rebates and advertising allowances, which companies must account for.

“This often has been a one-time issue rather than something that impacts growth rate and cash flow,” Thomas said.

Office Depot has annual sales of more than $15 billion and sells to customers in 42 countries.