Office Depot plans to close at least 400 US stores
BOCA RATON, Fla. (AP) — Office Depot is planning to close at least 400 U.S. stores, as its merger with OfficeMax resulted in an overlap of retail locations that can be consolidated.
The combined company's financial results beat Wall Street estimates for the January-March quarter and it raised its full year forecast for operating income on Tuesday.
Its shares jumped 17 percent in morning trading.
The office supply retailer had 1,900 stores in the U.S. at the end of the first quarter, so the plans call for closing about 21 percent of them. Office Depot and OfficeMax Inc. completed their $1.2 billion deal last November.
Office Depot said it has not quantified the number of jobs that will be affected by the store closures but that it will look to place its best talent impacted by the store closings into new roles, wherever possible.
Chairman and CEO Roland Smith said in a statement that one of the company's goals this year was to improve how its stores are positioned in North America to meet customer demand better and ensure that it's well positioned in the markets it serves.
"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 customer," Smith said.
Office Depot said Tuesday that it expects to close 150 U.S. stores this year, mostly in the fourth quarter. It closed 14 stores in the first quarter, a company spokeswoman said.
All of the store closures are anticipated to occur by the end of 2016.
The store closings are expected to result in at least $75 million in annual savings by 2016's end and add to earnings starting next year.
Office Depot, which is based in Boca Raton, Florida, said that it's still trying to determine expected working capital savings and costs related to the store closings.
The company also reported its first-quarter financial results on Tuesday, which include results from OfficeMax. The year-ago results do not include OfficeMax.
For the period ended March 29, Office Depot lost $109 million, or 21 cents per share. In the prior-year period it lost $17 million, or 6 cents per share. Removing merger-related expenses and other items, earnings were 7 cents per share. Analysts surveyed by FactSet expected earnings of 3 cents per share.
Revenue climbed to $4.35 billion from $2.72 billion. Pro forma revenue for the year-ago period was $4.48 billion. Analysts expected revenue of $4.27 billion.
The company raised its 2014 outlook for adjusted operating income to be at least $160 million from a prior view of at least $140 million.
Shares of Office Depot rose 70 cents, or 17 percent, to $4.87 in morning trading.