Office Depot (ODP) Rises Sharply on Better Than Expected First Quarter

Shares of Boca Raton, Florida, based Office Depot, Inc. (ODP) rose on Tuesday, against the backdrop of a sharp sell-off on Wall Street overall. Office Depot was up 15.83%, rising 66 cents per share, to close at $4.83, on volume of 61,326,276 shares. The company announced better than expected first quarter results, as well as a plan to close 400 of the company's stores.

Office Depot provides products, services and solutions for the workplace.
The company's core office supplies include print and document services, business services, facilities products, furniture and school supplies. The company operates under the Office Max name, in addition to Office Depot, and operates both in the US and abroad. The company has 64,000 employees and 1,900 retail outlets. For 2013, Office Depot had a net loss of $20 million on revenues of $11.24 billion. The company reported net earnings of 7 cents per share in the first quarter, against analyst expectations of 3 cents per share. First quarter revenue came in at $4.35 billion, against an expected $4.28 billion. The results were 3% below the results of a year earlier, had operations of both Office Depot and Office Max been combined as of January 1, 2013. The company also announced that it will close 400 stores, which represents 21% of its 1,900 outlets. 150 of the stores are expected to be closed in 2014, with the remainder slated to be closed by the end of 2016. Office Depot merged with Office Max in November of last year, and is still in the process of consolidating operations and eliminating duplicate services. The closures announced today represent a step in that direction. Office Depot Chairman and CEO, Roland Smith, reported, "One of our 2014 critical priorities is to improve our store footprint in North America to best meet customer demand, ensure we are appropriately positioned in the markets we serve, and align with our unique selling proposition which we are developing this year. The overlapping retail footprint resulting from the merger provides us with a unique opportunity to consolidate and optimize our store portfolio, while maintaining the retail presence necessary to serve our customers." Despite an expected $400 million in cash merger expenses during the three year period from 2014 to 2016 - most of it in 2014 - the company expects to turn a net operating profit of $160 million in 2014. Office Depot faces challenges inherent in the office products industry. Demand for paper-based office products has been falling due to technological advancements. Computer laptops, tablets and smartphones are reducing the need for paper-based office products. In addition, declines in business and consumer spending are also taking a toll on the office products industry. Other News About Office Depot, Inc. Staples, OfficeMax, Office Depot - do office-supplies chains have a future? Sales are slowing at retail stores, but increasing in online sales. Office Depot still a Neutral at Goldman Office Depot reinstated as "neutral" - outlook for office supply retailers remains guarded. Other Stocks in the News Is Zillow Still a Good Investment? Stock is up 76% over the past year; mobile segment expected to keep growth rolling. IBM - Don't Bet Against Big Blue Despite flat revenues, stock expected to return to $200 on stock buybacks and cost reductions.

Published on May 7, 2014
By Kevin Mercadante

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