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ODP Corporation (ODP +5%) looks anything but "stationery" today after selling its CompuCom Systems subsidiary for a mix of cash, promissory note, and a contingent future earn-out, totaling $305 mln. The office supply retailer that operates brands Office Depot, OfficeMax, and others also upped its share buyback authorization by another $200 mln, bringing the total authorization to $650 mln, about half of which was paid out in 2021.

• The sale is being received well by investors, especially after ODP noted in its Q3 earnings call in early November that there was no assurance that a CompuCom sale would go through by year's end. This led some to doubt whether a deal would go through at all.
• Recall that in late 2017, ODP paid $1.1 bln for CompuCom, which was expected to contribute around the same amount in annual sales. Although CompuCom sales in the first year were $1.1 bln, they fell in each year after that, most recently seeing a 14% yr/yr decline to $854 mln in FY20. Therefore, the move to get this laggard off the books has prompted a round of applause from investors, as ODP can now shift focus entirely to its core brands.
• Furthermore, 2022 is gearing up to be a solid recovery year for ODP. As the company's revenue is mainly derived from selling to offices, it is perhaps no wonder that ODP has suffered significantly from remote work trends and from COVID-19 variants continually delaying workers' return to worksites. For example, revenues declined in 10 out of the past 12 quarters yr/yr. On top of those headwinds, global supply chain constraints have driven up ODP's costs, affecting the company's ability to expand gross margins, which have been stuck at around 21-23% for the past two years.
• However, with reports indicating that the newest Omicron variant is much less severe than past variants and with global supply chains expected to begin normalizing sometime this year, ODP's brands could begin to see a tailwind as offices also see an influx of workers.

Overall, with CompuCom having consistently lagged since ODP acquired the company in 2017, ODP's divestiture of this division is receiving a stamp of approval from investors. In addition, the coinciding increase to ODP's share repurchase program is also driving up the share price today.

With over $300 mln returned to shareholders in 2021 and an estimated $342 mln authorized for share repurchases through 1H22, or about 16% of its current market cap, ODP's focus is on maximizing shareholder returns is clear. Coupling this with an easing of the pandemic, which should fuel a broader recovery of employees to offices, ODP is well-positioned to return to growth in 2022.