Office Depot Inc (NASDAQ:ODP) continues to struggle after the failure of the Staples, Inc. (NASDAQ:SPLS) deal. The firm is selling its $2 billion operations for almost zero proceeds in Europe. While the firm is still profitable, and the income yield looks attractive, sales erosion is happening at a rapid place. Considering the drop in sales and nearly hopeless situation, stock seems too expensive to be considered for buying at this time.

The highlights

Office Depot has reported the divestment of its unprofitable European businesses. The sale of this $2 billion operations yields almost no proceeds for the firm, emphasizing the perils for equity investors if it is the future for North American operations too. However, the balance sheet still appears equitably strong, with the North American businesses lucrative.

With the FTC hindering the Staples merger deal and online rivalry continuing to impact Office Depot’s sales, the state remains extremely dire. Regardless of the decent balance sheet liquidity and cash flow yield, the experts remain cautious, and see no reversal of sales trends.

The prospects

The long term stance for Office Depot remains extremely challenged of course, led by the appearance of the discount retailers. Sales gradually declined fell to $11 billion in FY2013 from $15 billion in FY2007 for these apparent reasons. In the interim, continued reorganization and losses have battered the book value of ODP stock price.

An industry facing problems tends to consolidate. In 2013, Office Depot reported the purchase deal worth $976 million of OfficeMax. That deal led in a pro-forma sales base of $17 billion, however, these figures were never achieved. Revenue surged to $16 billion in FY2014 but have already declined to $14 billion by now. While revenues are flat against to a decade ago the outstanding share count has doubled during this period, with dilution causing from the acquisition of OfficeMax.

It is tough to image, but stock of Office Depot essentially traded around $40 in 2007. Shares plunged to almost $1 during the slump following big losses and fears about bankruptcy. When the firm announced the acquisition of OfficeMax in 2013, shares traded around $4 as the suffered dilution sealed in a considerable deal of value demolition for investors.