An expected merger between Office Depot Inc (NASDAQ:ODP) with its rival Staples Inc did not materialize as a result of failed regulatory muster. The two have been in talks for the last three months but still did not meet the requirements which will occasion the closure of more than 300 stores of the Florida-based company. The duo, however, tried to challenge the U.S for blocking the proposed $6.3 billion merger, but the federal judge could hear none of it explaining that it would not be in favor of the market.
The closure of the stores will occur within a period of three years. Apparently, 400 of them have already been closed following the industry’s move to incorporate technology as well as stiff online competition, particularly from Amazon. Office Depot’s proposal to take over the smaller OfficeMax back in 2013 was also disapproved by the U.S. Federal Trade Commission which argued that it would result in higher prices and in return affect the big companies that buy office supplies in bulk.
What next for Office Depot Inc
Apart from its intention of closing various stores, the company has also announced other positive moves. It will endeavor to grow its contract channel, optimize retail operations in North America as well as well as implement multiyear cost reductions. The target is trim $250 million in costs by 2018. However, the company declined to confirm whether any related job cuts was a way of reducing expenses or it was purely a measure to lower overall general and administrative costs.
Let’s explore the company’s performance on revenue and shares
The company’s shares rose 15 cents which translate to 4.7% gaining a $3.44. However, it still fell short of most expectations because its revenue slid 6% to $3.22 billion. According to industry analysts by Zacks Investment Research, the per share earnings were half the expectations. Nonetheless, the sales will still fall given the projected closure of more stores.