Although Office Depot (NYSE:ODP) noted poor Q2 sales and announced the impending closure of 400 stores by 2016, the retailer reported a better operating profit growth than expected due to its merger with OfficeMax.
The two retailers merged last November shortly after the announcment of 2016's coming closure of 400 stores. The company reported that the number of closings for 2014 would exceed the initial expectation of 150 to 165 closures stated in the quarterly report. Savings gained in light of the closures are predicted to increase from $75 million to $100 million, reported Retailing Today.
Office Depot estimates that savings will result in annual run-rate synergies totaling $700 million, more than the estimated $400 million to $600 million the company predicted when the merger was first announced, and more than the $675 million estimated at the end of the first quarter.
"During the second quarter, our team executed exceptionally well, which enabled us to deliver merger synergies more quickly than anticipated," said Roland Smith, chairman and CEO of Office Depot. "We are very pleased with the integration of legacy Office Depot and OfficeMax as we create a culture focused on achieving our critical priorities in the near and long term. As planned, we have completed our analysis of the North America retail store optimization strategy and have continued to make progress on the development of our unique selling proposition. Based on accelerated synergies and improving execution, we have updated our full-year 2014 outlook for adjusted operating income to be not less than $200 million, an increase from our prior outlook of not less than $160 million."
Despite the adjustments, sales remain challenging for the retailer. While combined, Office Depot and OfficeMax saw a sales increase of $3.8 billion, up from $2.4 billion. However, Office Depot's stand-alone results were down from $3.9 million.
Trying to woo young shoppers in the BTS season, Office Depot recently launched an augmented reality promotion that brings members of the band R5 to shoppers' phones.
-See this Office Depot press release
-See this Retailing Today article
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