Cuts shield Acco Brands from economic headwinds

Acco Brand products for sale at a Chicago Walgreens. (Meredith Wilson)

By Meredith Wilson

Acco Brands Corp. saw fourth quarter profit fall 12.5 percent because of a strengthening U.S. dollar and retail consolidation, but exceeded analyst estimates for the quarter. Cost-cutting measures throughout the year led the company to post an 18.8 percent rise in profit for 2014.

Lake Zurich-based Acco, one of the world’s largest office supply manufacturers and wholesalers, reported $43.9 million, or 38 cents per diluted share, in the quarter ended Dec. 31. In the prior-year quarter, the company earned $50.2 million, or 43 cents per share. Analysts had estimated that Acco’s diluted EPS for the quarter would be 35 cents per share.

The company experience depressed sales for the most recent quarter,  $459 million compared with $503 million in the prior-year quarter, an 8.7 percent narrowing.

Weak foreign currency drove down the company’s international sales by 9 percent in the fourth quarter.

“What we can’t avoid is the impact of translating foreign currency into U.S. dollars. We might get the same amount of euros, we might get the same amount of real or the same amount of the loonie for us, but then we have to translate it into U.S. dollars, and that’s where the impact is going to be,” Acco President and CEO Boris Elisman said during a conference call.

Elisman said that Acco is facing “significant headwinds” both at home and abroad.

The strengthening of the dollar has hurt sales in Europe and Latin America. During the conference call, Elisman noted that several buyers abroad either cancelled or suspended their orders because of currency exchange in 2014.

In the United States, retail mergers threaten the company’s top line. In 2014, Acco lost $40 million in sales after Office Depot Inc. and Office Max Inc. merged and closed 400 retail stores. Elisman expects losses of a “similar magnitude” when Staples Inc. merges with Office Depot. The merger was reported on Feb. 2, but is unlikely to take place in 2015.

Despite a 4.3 percent decline in revenue, the company reported an increase in profit in 2014 from the previous year, up to $91.6 million, or 79 cents per share, from $77.1 million, or 67 cents per share.

“I think they’re executing well in a somewhat difficult environment,” Kevin Steinke, an analyst at Barrington Research Association Inc., said.

Steinke attributes the rise in profit to cost-cutting and productivity measures.

“Historically, they’ve done a pretty good job matching revenue to cost,” Steinke said. “Unfortunately, it’s just the reality, if you have less sales, you don’t need as many people.”

Acco executives expect an additional $30 million in cost reduction in 2015.

“Most of that will go to protect our bottom line and address pressures from currency and consolidation,” Elisman said.

The company expects sales to continue to decline in 2015, falling in the “high-single or low double digits,” and the adjusted EPS for the year to be between 70 and 74 cents per share after factoring in changing currency rates. Analysts place Acco’s 2015 EPS at 80 cents per share. Actual EPS in 2014 was 79 cents per share.

“I think they’re appropriately factoring in the macroeconomic headwinds,” Steinke said. “They’ve learned from the past to be realistic with their outlook, even a little conservative.”

The stock closed at $7.51, down 56 cents.

Photo at top: Acco Brand products for sale at a Chicago Walgreens. Meredith Wilson/Medill