Office Depot Plans 70 Store Closures in North America
Office Depot Inc., the biggest U.S. office-supply retailer, said it plans to close 70 stores in North America, including five in California, and slash 1,590 jobs, as it warned that earnings for the year will miss estimates.
The company said it will take a fourth-quarter pretax charge of as much as $300 million as it shutters 67 stores in 18 states and three stores in Canada. The closures will include all Office Depot outlets in Cleveland and Columbus, Ohio; Phoenix; and Boston.
The company also will invest $110 million to revamp the chain and to install new inventory-tracking systems at warehouses.
New Chief Executive Bruce Nelson is trying to boost profit by scaling back expansion plans, focusing on top-selling products and building smaller stores. The company and its rivals in the $12-billion office-supply industry, OfficeMax Inc. and Staples Inc., raced to add more stores and eventually faced saturation in many markets, analysts said.
The job cuts include about 1,470 employees from the North American store closings and 120 contract sales workers, a spokeswoman said. That amounts to about 3.3% of the company’s work force. Office Depot also is closing six stores in France, eliminating as many as 90 jobs.
The company is also trimming about 10% of its 1,200-member outside sales force, which works with commercial accounts.
The restructuring follows a similar announcement by OfficeMax, which said in October it would close 50 stores.
About three-quarters of Office Depot’s stores are in areas where there’s a direct competitor, according to analysts. After the closures, Office Depot will have 818 stores in North America.
Office Depot said it will slow store openings to about 50 this year, from the 100 it had planned. Smaller outlets will be built in regions that have proven profitable.
The retailer said it expects full-year profit of about 70 cents a share, below the 73-cent average estimate of analysts surveyed by First Call/Thomson Financial.
Analysts are expecting fourth-quarter earnings of 12 cents a share, down from 24 cents in the year-earlier period.
Shares of Office Depot rose 81 cents to close at $8.13 on the New York Stock Exchange.
