The company’s proposed $6.3 billion merger with Staples Inc. (NASDAQ: SPLS) remains the Office Depot’s primary results driver. The company closed 20 North American stores in the first quarter, sending same-store sales in the region down 2%. Internationally, same-store sales declined 7% in constant dollars.
Office Depot said it is on track to complete its merger with Staples by the end of the year. The U.S. Securities and Exchange Commission asked the companies for additional information on the transaction in late April.
In its outlook statement, Office Depot said that it expects total sales in 2015 to be lower than a year ago due to the store closures, the impact of the strong dollar, business disruption from the pending merger and continuing tough market conditions. The company also said it expects to achieve over $750 million in merger synergy benefits by the end of next year related to its acquisition of Office Max. Merger-related costs are expected to total $250 million through next year approximately half of which is going to close 135 stores in 2015 and at least 100 stores in 2016. Office Depot also expects to post about $100 million in expenses related to the merger with Staples.
The company’s CEO said:
We were pleased to have doubled adjusted operating income in the first quarter versus last year, primarily due to continued excellent execution on our merger integration, synergies and efficiencies. As expected, we experienced sales declines compared to prior year, driven primarily by planned store closures and foreign currency translation. We continue to focus on executing on our Critical Priorities and remain on track with the Office Depot/OfficeMax merger integration and our European restructuring.
Shares were inactive Tuesday morning, having closed up about 0.6% on Monday at $9.38, in a 52-week range of $4.26 to $9.77. Thomson Reuters had a consensus analyst price target of around $10.20 before the results were announced.