Office Depot said it plans to shut down up to 400 stores in the United States within two years as it hopes to streamline operations after merging with OfficeMax. The firm revised upwards its projections for full-year adjusted operating income.
Office Depot’s stocks, which posted better-than-estimated results for the first quarter, surged as high as 20% in early trading. The shares were among the highest climbers by percentage among stocks listed on the New York Stock Exchange on Tuesday.
“This stock looks to be a beat and raise story throughout 2014,” read a note by analyst David Strasser of Janney Capital Markets.
The move was expected as a significant number of stores run by the two firms share locations, CNN reported.
Office Depot boss said that the closure of 400 shops will start to inject profit in 2015 and is projected to result to $75 million worth of run-rate savings by the end of 2016.
Office Depot and competitor Staples Inc have been grappling with falling sales in the US as customers turn to online stores, mass merchants and drug shops for purchases of office supplies, according to Reuters.
Staples announced in March intentions to do away with 225 stores in the US and Canada, which constitute about 12% its North America outlets. The company forecast another tumble in quarterly sales.
Office Depot announced on Tuesday that it will shut down 150 outlets in 2014. It said in April that it planned to close 19 Canada-based OfficeMax stores.
By the end of 2009, Office Depot and OfficeMax ran about 2,085 stores combined in North America. The figure will fall to around 1,500 outlets in the United States by 2016 after the closings.
Retail same-store sales tumbled 3% in the first three months of 2014 for Office Depot in North America. But the sales have improved from the fourth quarter.
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