Office Depot completed the first phase of its US retail store optimization program, launched in 2014, which resulted in the closure of 400 stores, with sales transfer rates of over 30%. The company decided to expand this program and close another 300 stores over the next three years. In the second quarter of 2016, Office Depot closed 42 stores as part of the first phase of the retail store optimization program. Over the remainder of 2016, it will close another 25 stores as part of the program’s second phase.

Expanding the “Store of the Future” Format to 24 Stores

At the same time, the company plans to expand its“store of the future” pilot program to 24 stores by the end of this year and to operate 100 such stores in 2017. The “store of the future” format features a smaller, 15,000-square-foot, footprint with more elements designed to enhance the shopping experience, such as a curated assortment of products and expanded services. Office Depot expects these elements to be incorporated across its retail portfolio in the coming years.

Source: Company reports

The store format reorganization is part of a plan to reposition the company as a stand-alone business following the prolonged Staples acquisition attempt. Antitrust regulators blocked Staples’ proposed acquisition of Office Depot in May 2016. The expansion of the store closure plan is just one of the initiatives Office Depot launched following a comprehensive strategic business review. The company has also identified opportunities to grow sales in the contract channel by improving penetration into adjacent categories and by increasing share of wallet with existing customers. The company is launching additional cost-savings programs that include implementing a more effective customer coverage model and reducing indirect procurement costs. Office Depot expects to see a synergy benefit of over $750 million from its merger with OfficeMax, and the additional costs savings will bring the annual savings benefits realized since 2014 to over $1 billion by the end of 2018. However, Office Depot expects total company sales to be lower in 2016 than they were in 2015 due to the reorganization and the business disruption that resulted from the failed Staples merger.

Office Depot 2Q16 Sales: $3.2 Billion

The company reported $3.2 billion in sales for the second quarter of 2016, a 6% decrease from a year ago. It reported net income of $210 million in the quarter, compared to a net loss of $58 million in the second quarter of 2015. Office Depot initiated a quarterly cash dividend as a result of its strong liquidity position and confidence in its ability to generate future cash flow. It declared an initial quarterly dividend of $0.025 per share, payable on September 15, 2016.

Source: Company report

Source: Company reports