The Recovery of Office Products, Sort Of
May 6, 2014 by Jon C. Ogg
The combined Office Max and Office Depot had some 1,900 stores, and at least 400 will be closed — about 20% — later this year. While its same-store sales were down by 3% in the most recent quarter, the adjusted earnings came to $0.07 per share on $4.35 billion in revenue. Thomson Reuters was calling for $0.03 in earnings per share on $4.28 billion in revenue.
Before you go celebrate, keep in mind that the company posted a wide loss on a net basis. It is also hard to compare real revenues because of the merger, but the negative same-store sales should speak for itself.
What is driving shares higher is that the company raised its annual cost savings target post-merger to more than $675 million by the end of 2016. Its prior outlook was more than $600 million.
As far as why Staples is not enjoying the same gain, it may be because the companies are in slightly different situations. Staples is also much larger at $8.2 billion in market capitalization, versus only $2.6 billion for Office Depot.
Office Depot shares were up a sharp 18% at $4.94 in the first hour of trading, on more than 200% of normal volume with 20 million shares trading hands, and against a 52-week range of $3.75 to $5.85. Amazingly, Staples shares were up only 1% at $12.68 in light volume of 3.2 million shares within the first hour of trading.
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