Office Depot cutting 112 stores, 2,200 jobs
CHICAGO – Office Depot Inc. will close about 9 percent of its North American stores and cut 2,200 jobs over the next three months while planning to open fewer locations next year in an effort to cut costs.
Shares of the office supply chain rose more than 12 percent after Wednesday’s announcement.
The plan to shutter 112 stores will reduce the chain’s base to 1,163. It plans to close 45 stores in the Central U.S., 40 in the Northeast and Canada, 19 in the West and eight in the South.
Office Depot, which began the year with about 49,000 workers, also will close six of its 33 North American distribution facilities.
Meanwhile, the Delray Beach, Fla.-based company said it plans to shut another 14 stores next year while opening just 20 new sites, half of what it planned.
Analysts said the move was needed and will likely give the company a much-needed short-term financial boost. But they said they doubted the effort would be enough to fix the company’s financial condition.
“It’s not enough to really close the gap and make a meaningful impact compared to Staples and the mass merchant competitors,” said Morningstar analyst R.J. Hottovy. “But it’s probably a Band-Aid on a flesh wound.”
Goldman Sachs analyst Matthew Fassler said Wednesday’s announcement — while widely anticipated after the company announced it was starting a strategic review in late October — involves more locations that many expected.
“We view this program favorably,” he told investors in a research note. “… We expect (Office Depot) shares to benefit from this announcement, though it does not significantly counteract the tough reality of low underlining profitability, and obviously does not remedy cyclical challenges.”
Office Depot will take related charges of $270 million to $300 million in 2008 and 2009.
The company plans to work with Gordon Brothers Retail Partners LLC to liquidate the material in the stores, a process it hopes to be completed by late March, according to a regulatory filing.
The struggling retailer reported a third-quarter loss due to slumping sales as consumers and small businesses cut back spending in October.
Office Depot shares, which have tumbled more than 82 percent since the beginning of the year, climbed 30 cents, or 12.4 percent, to $2.73 in midday trading.