Office Depot to close 300 stores, expand test pilot

Office Depot (NASDAQ:ODP) plans to close another 300 stores as part of its retail optimization program and will expand a new store pilot to 24 locations.

The office supply retailer completed the closure of 400 stores in the second quarter of this year, a move initiated in 2014 under its "retail store optimization" program following the merger with OfficeMax in 2013.

"This plan resulted in the closure of 400 stores, with sales transfer rates in excess of the company's 30 percent stated target, leading to over $100 million in ongoing benefits," noted management in a second quarter earnings release. "Based on the success of this initiative, Office Depot is expanding this plan to include approximately 300 additional store closures over the next three years."

Small formats, however, represent an opportunity for growth. The company will extend its test concept to 24 locations this year and plans to operate 100 such units in 2017.

These formats are just 15,000 sq. ft. and carry a more curated product assortment and expanded services. Elements of this store design and operation are expected to be extended to larger locations throughout the store base.

Management has also identified opportunities to expand product offerings in adjacent categories with the goal of capturing more sales from existing customers, but did not give details.

Office Depot is trying to find its footing following the failed merger with Staples earlier this year.

"We are making good progress rebuilding our sales pipeline and moving our overall business forward, despite the disruption of the prolonged Staples acquisition attempt," said Roland Smith, chairman and CEO. "The initiatives we announced today are a result of our comprehensive strategic business review which is now substantially complete."

Sales for the second quarter fell 6 percent while net income increased to $210 million from a loss of $58 million during the same period last year.

For more:
- see this Office Depot press release