Office Depot plans to close at least 400 stores
Office Depot Inc raised its forecast for full-year adjusted operating income and said it would close at least 400 stores in the United States over two years, sending the office supply retailer's shares up about 10 percent before the bell.
The company, which also reported better-than-expected quarterly results due to cost-cutting, said it would shut 150 stores this year.
The store closures are a part of the company's plan to consolidate operations after the acquisition of OfficeMax in November, Chief Executive Roland Smith said in a statement.
Office Depot had 1,900 U.S. stores as of March 29.
The closure of the 400 stores will start adding to profit in 2015 and is expected to lead to annual run-rate savings of at least $75 million by the end of 2016, Smith said.
Office Depot and rival Staples Inc have been struggling with declining sales in the United States as shoppers shift their office supply purchases to e-retailers, mass merchants and drugstores.
Staples said in March that it would close 225 stores in the United States and Canada, about 12 percent of its North America outlets, and the company forecast another quarter of sales declines.
Office Depot's North America retail same-store sales fell 3 percent in the first quarter ended March 29.
However, the business seems to have improved from the fourth quarter, despite extremely cold weather in the first quarter, B. Riley & Co analyst Scott Tilghman said.
"Same-store sales were down 4 percent last quarter so (this is) definitely a move in the right direction ... despite all of the headwinds," he said.
Tilghman also said that Office Depot might become more aggressive in adding products and services to arrest the decline in sales.
Staples said in March that it would refresh about 20 percent of the products in its stores, adding new items in categories beyond office supplies, such as storage solutions and maintenance repair and operations items.
Office Depot raised its full-year adjusted operating income forecast to at least $160 million from $140 million.
The company posted a net loss of $109 million, or 21 cents per share, attributable to common stockholders.
Office Depot posted a net loss of $17 million, or 6 cents per share, a year earlier.
The company earned 7 cents per share, excluding items.
Including OfficeMax operations, sales were $4.35 billion. Office Depot alone had sales of $2.72 billion a year earlier.
Analysts on average had expected a profit of 3 cents per share on sales of $4.28 billion, according to Thomson Reuters I/B/E/S.
Office Depot's shares closed at $4.17 on Monday on the New Stock Exchange. The stock has fallen about 21 percent this year so far.